During the quarter the company (including Bradford & Bingley) took in net deposits of £800m and lent a net £800m in mortgages, thus demonstrating very clearly how much new mortgage lending depends on success in attracting deposits. This net lending figure compares with £2bn in the first quarter of 2008 and minus £1.2bn in the previous quarter.
Gross mortgage lending in the first quarter was £5.2bn, compared with £10.2bn in the first quarter of 2008 and £5.1bn in the previous quarter.
Abbey has offered a competitive range of mortgages throughout the year so far and current indications are that this will continue. In addition the Alliance & Leicester mortgage portfolio has been considerably strengthened and Group strategy is to achieve the major increase in lending through the A&L brand this year.
Abbey has suffered some service issues recently as a result of its success in attracting business and the acquisition of the A&L brand gives it the same advantage HBOS has had in that it can channel business through whichever brand has the greatest spare processing capacity. This no doubt accounts, at least in part, for the recent increase in the A&L product range.
One of the key differences between the brands used to be that many A&L mortgages had a percentage arrangement fee, whereas Abbey mortgages had a flat rate fee. However, with the increase in the A&L range that brand now has a mixture of percentage and flat rate fee mortgages.
Both brands currently offer very competitive fixed and tracker products for most periods, including a market leading four year fix from A&L and new market leading 7 and 15 year fixed rates from Abbey.
Abbey recently reintroduced its lifetime tracker offset mortgage for loans up to 75% LTV with a rate of Bank Rate + 3.25%. Prior to the credit crunch this product was available at Bank Rate + 0.49% but in the current market their new rate is the market leading offset at 75%. In addition it only has a nominal early repayment charge of £250, although the arrangement fee is relatively high at £1,495.