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HBOS is down but by no means out

Much of the discussion about the state of the mortgage market revolves around figures – the level of house price inflation, movements in the base rate or the income multiples first-time buyers need to get on the property ladder.

Of most interest to brokers are the figures that relate to monthly lending volumes compar-ed with the previous month or the same period the year before. They give the best indication of how busy the market is and how lending volumes are affected by conditions such as the re-cent base rate rises.

For a while now, HBOS has topped the Council of Mortgage Lenders’ largest lender list. It is in a seemingly untouchable position with a gross lending market share above 20%.

But this market doesn’t often allow the status quo to be maintained and constant changes to its conditions can have a serious impact. And to prove the point, last week HBOS announced disappointing net lending figures.

The mortgage giant laid the blame for this firmly at the feet of the controversial changes it has made to its retention strategy. The end result looks to be that HBOS’ net lending share will be nearer 10% than the usual 15%.

Undoubtedly this was a less successful Q1 and Q2 than HBOS would have hoped for, but it certainly hasn’t thrown in the towel. Ominously for its rivals, HBOS’ pre-close trading statement suggested that this could be a temporary glitch and that it is getting a sense of the tolerances and rate sensitivities that guide borrowers’ decisions to stick or twist.

So we could see continued aggression from HBOS in the second half of the year and it will be interesting to see how its competitors cope.

One lender that will be keen to take the fight to HBOS is Northern Rock, which has reportedly leapfrogged both Lloyds TSB and Abbey in the CML’s table to take second spot. It should even hold off Nationwide’s challenge after it merges with Portman. Northern Rock has kept its head down, plugging away with a product proposition that appeals on a number of levels.

Its fixed rates offer a degree of flexibility that others have failed to mimic. The same can’t be said for its Together product, which has been blatantly copied by a number of lenders, including BM Solutions and Alliance & Leicester.

Previously cautious about the 125% LTV sector, these len-ders have finally cottoned on to its merits and are keen to win business in a niche market dominated by Northern Rock until now.

Northern Rock’s results continue to speak volumes and it has succeeded in stealing a march on its nearest rivals, which have struggled to keep up.


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