Small lenders gain from post-MMR criteria changes

The top six lenders are losing market share to smaller players as they have been slower to relax their criteria post-MMR, say brokers.

In the months leading up to the MMR in April 2014, there was a general tightening of criteria across the market, especially in areas such as interest-only, self-employed and lending into retirement. However, in recent months many smaller lenders have loosened their criteria in these areas, which has seen them steal business off the bigger lenders.

This has been highlighted in the half-yearly reports published so far.

Overall, lending was down year-on-year from £97.6bn in the first six months of 2014 to £96.6bn in H1 this year. And of the H1 2015 results released so far, it is evident the bigger lenders are losing ground to smaller market participants.

Royal Bank of Scotland, Lloyds and Santander have so far published their mortgage lending figures and all have experienced a year-on-year decline, with RBS down by 7.1 per cent, Santander by 7 per cent and Lloyds by 19.1 per cent.

Only a handful of the smaller lenders have published their figures but, among them, lending has increased significantly. Virgin Money has experienced a 44 per cent year-on-year rise, Skipton is up 31 per cent, Coventry up 25 per cent and Paragon up 98 per cent.

Brokers believe smaller lenders have been quicker to loosen their criteria post-MMR and are reaping the rewards for doing so.

Chadney Bulgin mortgage partner Jonathan Clark says: “The smaller lenders are more fleet of foot at the moment and able to adapt and change quicker. We are doing more with niche lenders and getting approached all the time.

“The big six are slowly reacting and making some changes but not quickly enough, clearly.”

Trinity Financial products and communications manager Aaron Strutt says: “The bigger banks have said they are losing deals to some smaller lenders. There is a lot more competition in rates and criteria. Not everybody can tick all the boxes with the big lenders so then you would probably go to one of the lenders with more lenient criteria.”

John Charcol senior technical manager Ray Boulger says: “I expect this trend to continue. Several of the smaller building societies have started to get more aggressive and the shifts in criteria are tending to come from them.”