Money Partners is predicting a price war among lenders in 2007 as the market grows to the point of saturation, with US investors being first to run in the event of a downturn.
The UK market has recently seen Merrill Lynch, Lehman Brothers and Morgan Stanley enter the lending sector, along with General Electric and General Motors.
But Bob Sturges, director of marketing at Money Partners, says: “The lending market is getting close to saturation point. Many lenders are having to rely on remortgages, but Council of Mortgage Lenders figures show that remortgage numbers are declining.
“Investment banks will monitor the situation. They are multinational players with multiple business channels, forever merging and acquiring businesses at home and abroad. They would have no problem pulling out of the UK market if things get hot.”
John Prust, director of sales and marketing with Lehmans, says: “US investors have always tended to have short-termist mentalities but not Lehmans. It has been in the UK market for 10 years and is not about to go anywhere.”
Mike Culhane, chairman and chief executive of Oakwood, which was recently acquired in part by Merrill Lynch, says: “There is a lot more commitment in US firms than was the case 10 years ago. They have more scale for growth.
“However, there is now a danger of some transference of credit concern as the US sub-prime market is in distress and investors’ fears in the US may travel across the Atlantic.”
Paul Hunt, head of marketing at Platform, says: “If the market takes a turn for the worse, all lenders active in the UK will suffer. A lender with a UK or European parent will act in just the same way as a US parent if profitability suffers.”