The CML’s statistics on individual lenders’ activity levels for the previous year always make interesting reading, and those just issued for 2016 are no different. While on the face of it, there is little change in terms of those lenders occupying the top 10 slots, below this position there is clearly a new wave of challenger banks and specialist lenders who made some significant progress last year, and will be looking to make similar strides in 2017.
Let’s start with some thoughts on those ‘big beasts’ that make up the top 10. Well, firstly, there appears to be a significant amount of stability. While the RBS and Santander have swapped places – now third and fourth respectively – and the TSB Group having broken into the top 10, it is pretty much ‘as you were’ in terms of a comparison with 2015.
But, what immediately springs out from the data, is that – with the exception of Lloyds Banking Group and Santander which showed minor drops – all those within the top echelons lent more last year than in 2015. Some showed quite significant increases, such as Nationwide which was close to £5bn up, and HSBC which was £3.2bn up – perhaps showing the benefit of adopting a strategy in which it distributed via the intermediary market for the first time.
All in all, this collective increase in lending would clearly have been welcomed at these institutions and I suspect would probably have resulted in larger targets being set for 2017. Now, if this is the case, how might we view the first six months of 2017 and what will those lenders now be thinking in terms of their ability to hit those targets?
Well, we have limited data to ‘play with’ but Q1 gross lending statistics from the CML were down on the first three months of 2016 – close to £63bn was lent last year, compared to just over £58bn, and while the estimate for this April (£18.4bn) was up on the same month last year (£17.7bn), we too might expect Q2 this year to be along the same, rather subdued, lines it was in 2016.
The ‘big quarters’ last year were Q1, Q3 and Q4, and part of me suspects that with the General Election having its traditional dampening impact, plus of course the uncertainty currently generated by the result and the opening of the Brexit negotiations, lenders might be heading into July wondering how they are going to make up a potential shortfall, and what they need to put in place to be able to reach those increased targets.
The good news of course – particularly for advisers and existing borrowers – is that the lending appetite is there, pricing is highly competitive and, when it comes to the remortgage market, there has perhaps never been a better time to secure a deal which can save money. Much has been written lately about those borrowers who are ‘languishing’ on SVRs when there are some very keenly priced fixed rates which, quite frankly, knock those SVRs into a cocked hat. Advisers who have clients on SVRs, and who can meet the lender’s affordability measures, should really be pushing at an open door in terms of transferring these on to much better rates.
However, it will not be the remortgage market alone that gets lenders to where they want to be this year, and in that sense one wonders how they are going to approach the ‘purchasing public’, particularly when it comes to first-time buyers, who despite the market competition are not really looking at environment where lending availability and pricing are top of the class. Indeed, as our recent LTV tracker showed, if you have just a 5% deposit and want to buy an average-priced home in the UK, then there are particularly slim product pickings to choose from.
And yet, as the year progresses, and perhaps those targets appear ever farther away, I wonder if more lenders will look at other product areas which are clearly underserved – like low-deposit mortgages – and believe there is untapped business to be written here. Certainly, for those first-timers who don’t have access to the Bank of Mum and Dad, there would appear to be far fewer options currently available and for those lenders – such as the building societies – who have mitigated their risk via mortgage insurance, for example, there should be a plentiful supply of potential borrowers to support.
2017 already feels very different to 2016 and as time progresses and lenders perhaps do not see the market moving along a 2016 trajectory, we might hope they open their doors more readily to those borrowers who are clearly not yet at the front of the queue when it comes to lender activity. The second half of 2017 will be very interesting for many reasons, but perhaps we will also be able to see a growth in purchase activity and, in particular, more first-timers getting on to the ladder.
Pad Bamford is business development director at AmTrust International, Mortgage & Credit