Good times rolled

2007’s lending figures hit £364bn, a record for the industry, but that was before the credit crunch overwhelmed the mortgage industry, says Richard Griffiths

The strange thing about the T2007 table of gross mortgage lending is that it looks so normal. The figures give no indication of the ongoing credit crunch that has strangled our industry since August last year.

Even Northern Rock’s data looks normal, albeit pushed into fourth place as a result of the Nationwide/Portman merger.

The total mortgage lending figure of £363.8bn published by the Council of Mortgage Lenders represents a 5% rise on the 2006 figure of £345bn and is the highest recorded.

Brokers generated a massive £242bn of mortgages in 2007 compared with £229bn in 2006. Their market share has seen an insignificant decline to 66.6% in 2008 compared with 66.7% last year.

Looking at lenders, HBOS maintained its 2006 lending volumes at just over £73bn but declined to provide a breakdown for its five brands – Halifax, Bank of Scotland, Intelligent Finance, BM Solutions and The Mortgage Business. On August 13 this year, the news broke on Mortgage Strategy’s website that TMB was closing its doors.

Abbey increased its lending to remain in second place. Nationwide climbed to third as a result of the Portman merger.

The biggest jump saw Bradford & Bingley increase its lending from £7.7bn in 2006 through Mortgage Express to £14bn, but this was due to a contribution of £4.78bn from B&B itself. We are told this is largely the result of the lender buying mortgage portfolios from GMAC-RFC.

In other words, it is not mortgage origination and represents an unfortunate double counting by the CML. Its focus should be on the amount of mortgage-related money borrowed by the public. Secondary trading of mortgage books and securitisations should appear in a separate table.

While other major lenders show increases over their 2006 figures, HSBC is the only top 10 lender to see a decline in volumes, down from £12.4bn in 2006 to £10.1bn. It also remains the only big lender to receive nothing in the way of introduced business.

In last year’s commentary on mortgage lending I said that HSBC might drop out of the top 10, a fate it avoided by the skin of its teeth.

I also predicted that edeus and other new lenders would appear in the top 30 table for 2007.

But no, we are advised by the CML that edeus didn’t submit a return and hence is absent from the table. It was common knowledge that edeus originated £200m to £300m in lending per month in the first half of last year. This alone would have given the specialist lender a top 30 position.

This raises the question of how many lenders failed to submit returns. Just how adrift is the CML’s £363.8bn figure from reality?

There has been a significant slippage in the amount of business written by sub-prime lenders such as GMAC-RFC, Platform and Kensington, unsurprising given the impact of the crunch last year.

The amount of mortgage business by lenders outside the top 30 fell too from 4.6% in 2006 to 2.1%, comparable with 2005’s figures.

Last year I commented on the in-explicable exclusion of broker-distributed mortgage volumes from the CML’s statistics. But I’m pleased to say that it now publishes quarterly broker figures on its website that date back to Q2 2005.

The CML lending figures show the 2007 split in terms of purchases, remortgages and further advances to be £154.9bn, £129bn and £79.9bn respectively. I’d assume brokers have little or no involvement with further advances.

The CML’s broker figures show the split between first-time buyer, home mover and remortgaging volumes. They break down as follows:

– Brokers account for 66.3% of home purchases and 69.7% of remortgages.

– Overall, brokers account for 67.9%, a figure remarkably close to the 66.6% shown in the table.

Hold on, I hear you say, the £363.8bn in the top 30 table includes £79.9bn for further advances. If they were excluded then brokers would have introduced £241.6bn out of £283.8bn or 85%. Oh well, back to the drawing board.

Looking ahead, the full impact of the credit crunch will be seen in the 2008 figures and that table will be anything but normal. NR will be the highest profile casualty and lending will fall below £300bn. Latest estimates hover around the £250bn to £260bn mark.

The spate of new lenders that sprang up in 2006/07, along with more established ones such as Mortgages PLC and Southern Pacific Mortgage Limited, were all but wiped out by the credit crunch.

Quite a few of the lenders seen below will not appear in the 2008 table, replaced by building societies moving up the ranks.

There have been some major initiatives this year, such as HSBC’s Rate Matcher deal aimed directly at consumers, while we have seen a flurry of branch-based products not available to brokers.

So the 2008 table will see a number of major changes. I also hope that it marks the worst for the market but I suspect it will be five years or more before we exceed 2007’s figures.

Richard Griffiths is chief executive of Network Data Holdings