Building societies’ mortgage market share dips to 25%

Christina Hoghton
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Christina Hoghton

The proportion of lending by mutuals slipped slightly compared to the same time last year

Building societies completed £17.3bn-worth of mortgage lending in the third quarter of 2017, accounting for 25% of the £68.1bn total mortgage lending market between August and October.

This was a slight fall in market share compared to the same period last year and a similar dip was seen in the share of mortgage approvals.

The mutual sector also approved 114,793 loans for a 29% share of the 397,532 total mortgages approved, according to Building Societies Association (BSA) data.

Market share for both gross lending and approvals slipped slightly compared to Q3 2016, with lending share down from 26% and approvals down from 30% of the market.

By value, gross lending was up 7% (from £16.11bn) on Q2 2017 and 6% (£16.37bn) on the same period last year, while the total number of approvals rose 1.7% (from 114,793) on Q2 2017 and 4% (110,216) on Q3 2016.

The BSA revealed that almost 90% of new mortgages in the third quarter of the year were on fixed rates, suggesting many homeowners would be protected from interest rate rises for a number of years.

Remortgage boost

BSA chief economist Andrew Gall noted that activity in the market had been subdued but there was a pick-up in remortgaging activity prior to the widely anticipated rise in the Bank of England Base Rate.

“Savings balances at building societies increased by over a billion pounds in Q3 of this year, but this is significantly lower than in the same period last year. This mirrors a trend of weak growth across the savings market as a whole,” he added.

Mortgage Advice Bureau head of lending Brian Murphy said the figures suggested that building societies have maintained a competitive advantage over their banks, “both in terms of the ability to offer market leading rates, but also perhaps a more flexible and pragmatic underwriting approach.

“Of course, the upswing in remortgages over the last quarter has no doubt provided building societies with a window of opportunity to grow their client base to balance the fact that the purchase side of the market was perhaps a little flatter in some areas than normal.”

He added that it would be interesting to see how building societies responded to borrower demand, “particularly in the currently more underserved areas of the market.”