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Mutual sector is likely to hold its own in 2007

The figures for 2006 have now been released from various industry bodies and all give a healthy picture of lending volumes last year.

The Council of Mortgage Lenders reports that gross lending hit a December record of 29.4bn which, al-though somewhat lower than November’s numbers, still eclipsed the previous year’s figure.

This gave a grand total of 346bn lending in 2006 – a massive 20% up on the previous year.

It is a similar story from the Building Societies Association, which also trumpets record lending figures at 52.8bn gross lending for the year.

It is interesting to look at the level of lending by the mutual sec-tor as a percentage of overall gross lending and despite all the expected challenges for societies, it holds up as a stable 15% over the past couple of years.

Net lending as a percentage of gross lending tells a similar story and while now a smaller proportion than in some years, it is still stable.

Having said that, Nationwide is by far the biggest hitter in the mutual sector. Looking at its interim results, it lent 14.5bn gross for the period April to September 2006.

While its accounting year does not run to the calendar year, if we make a broad-brush assumption of doubling lending over 12 months, Nationwide accounted for almost 55% of gross lending in the mutual sector.

Of course, this position of strength will grow with the forthcoming merger with Portman, which reported gross lending of 2.3bn in its interim results to June 2006.

This means that the combined force could account for more than 60% of all lending by societies.

Therefore, while it’s good to see that the mutual sector is hold-ing its own and coming up not only with innovative solutions but also well-priced products, there is no doubt that smaller societies will continue to face stern challenges.

But some societies have shown a good eye for opportunities and looked to broaden their scope, even offering to service the needs of smaller players in their sector.

The development of service providers such as Mutual One by Skipton is a good example, and Newcastle is also active in this area.

As for the forecast lending figures for this year, the CML is confident that lending will be even higher than last.

However, the base rate rise could change the outlook a little and Bank of Ireland has pointed out that it could dampen the level of applications. It has revised its forecast down by 10% to 330bn gross.

One certainty in 2007 will be the continued dominance of the broker channel.


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