Phil Whitehouse: blog

Monday 22nd August 2011

As the new football season kicked off – with no big summer tournament in place it seems like an age since the end of the last one – for firms across a multitude of sectors it is the time for posting their half-time results.

As many of us look forward to the new season with some degree of relish, and if you’re a West Brom fan like me, a similar degree of trepidation, we have a line of pundits and analysts suggesting just how the season will pan out.

In terms of parallels between the mortgage market and the Premiership there are a few. They both have ‘the big five’, although historically this was the ‘big four’ but thanks to the Middle East millions we can safely slip Man City into that equation. Of course it remains to be seen if Arsenal will cling on to such a billing or if the sale of some if its bigger names will signal an even greater fall from grace.

But let’s focus on the mortgage arena for a while and a take a look at some of these half-time results.

Of some of the top mortgage firms, Santander has reported a 21% decrease in gross lending between the first half of 2010 and H1 2011, a fall of £2.6bn.

Barclays reported £7.6bn in gross mortgage lending for the first half of 2011, down on the £8.5bn it did in the first six months of 2010, a 10.6% decrease.

Northern Rock reported gross mortgage lending of £1.5bn, down 25% from the £2bn reported in the first half of 2011.

Lloyds Banking Group has reported a £3.3bn loss for the first six months of the year and gross mortgage lending of £12.9bn, compared to £14.9bn in the first half of 2010.

In addition the Royal Bank of Scotland has reported a 12% drop in gross mortgage lending and a loss of £794m in the first six months of the year, compared with a £1.1bn profit last year.

It’s not difficult to spot the trend and such results have led to speculation from the Association of Mortgage Intermediaries that gross mortgage lending will fall short of the £140bn forecast by the Council of Mortgage Lenders.

AMI’s latest Quarterly Economic Bulletin says the CML target looks a little optimistic because in the first five months of the year gross lending reached £56.4bn, implying an annual total of £136bn.

AMI says the monthly run rate for the rest of the year must be 6% higher to reach the target, which is unlikely to be achievable given the likely weaker conditions in the second half.

Initially this doesn’t look like good news for the sector, but on a positive note it seems the results of many building societies are up. Indeed, gross lending at mutuals increased by 20% in the first six months of 2011 compared to previous year. It totalled £10.2bn, compared to £8.5bn in the same period last year.

Especially prominent in this was the revelation by the Yorkshire Building Society that it has doubled its gross mortgage lending last year.

Skipton Building Society increased gross mortgage lending to £717m in the first half of 2011, up from £141m in first half of 2010, and the Coventry Building Society has reported gross mortgage lending of £1.9bn in the first six months, up from £1.6bn in the same period last year.

Now, whilst likening the bigger players to the, shall we say, bigger clubs in the Premiership, we all know that on any given day anyone, including the mighty Baggies, can match and beat anyone.

It is this type of competition which makes the Premiership so watchable and highly lucrative. The smaller teams may not have the funding or bank balances afforded to the larger ones, but this does not stop them being a robust and well-organised unit that can innovate and conjure up the odd bit of magic from time to time to blow away their more fancied opposition. 

Like the Premiership, the players occupying the top spots are unlikely to change to any great extent, but it doesn’t mean that those below them aren’t as good value for their money. The well-worn footballing cliché of old is “it’s a game of two halves”, and while there is little to suggest that gross mortgage lending levels will be much different in H2 2011, there is certainly room for some smaller names to cause a few upsets and nick a few points though some fancy footwork.

And long may this continue as increased competition makes the mortgage market and the Premiership as compelling as ever.

* Phil Whitehouse is head of The Mortgage Alliance