Building societies have taken advantage of the problems facing many of the large banks by claiming their highest share of the UK mortgage market for over a decade. Analysis by Castle Trust has found that mutual lenders have almost doubled their share of the mortgage market since the credit crunch while they also dominate the ‘best buy’ tables.
While experts have welcomed the role that building societies continue to play, a leading London mortgage adviser believes that high value mortgage clients are often still better served by a bank than a mutual lender.
Sean Oldfield, chief executive of Castle Trust, said building societies now constitute 21.5 per cent of the gross mortgage lending market, up from 12.9 per cent in 2009. The research also found that mutual lenders have also been dominating best-buy tables, offering 83 per cent of the most competitive deals on the market.
FT Adviser reports that ‘average rates on building society best-buy mortgages are currently 3.26 per cent compared with 6.2 per cent in 2008 and lower than the 3.81 per cent in October 2012, when the Funding for Lending [scheme] started to take effect.’
Mr Oldfield added: “The strong recovery since 2009 means building societies’ market share is the highest since 1999. They are competing strongly against bigger banks and are proving to be innovative and responsive to the demands of the market.”
The research comes after the Building Societies Association recently revealed its 46 members had conducted a total of £2.5 billion worth of mortgage lending in February.
“Building societies are certainly playing an important role in the mortgage market,” said Islay Robinson, CEO of London mortgage broker Enness Private Clients. “However, while they can offer some excellent niche products and some best buy rates, they often won’t be suitable lenders for high value mortgage clients.” However, private banks may still be better for a high net worth mortgage clients…
“The problem with many building societies is that they have a maximum loan amount that won’t suit a high value mortgage borrower,” said Mr Robinson, the large mortgage expert. “Many building societies don’t want to put all their eggs in one basket and so will only lend a maximum of £250,000 or £500,000 in a single loan.
“In addition, as building societies don’t want to take on high risk borrowers their underwriting can often be very traditional. High net worth clients with unusual ownership structures or income sources will rarely fit the criteria of a mutual lender,” he added.
As many High Street banks have withdrawn from the large mortgage market over recent years, non-traditional lenders such as private banks and offshore banks have taken up much of the slack when it comes to high value mortgage lending.
Mr Robinson added: “Private banks often have both the underwriting flexibility and the knowhow to arrange million pound mortgages for high net worth clients. Frequently their rates are comparable with High Street deals and so many of our more wealthy clients are better served by a bank than a mutual lender.”
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