Abbey looks to take top spot as mortgage market share jumps

Published on Tuesday 29 July 2008 21:31

HBOS is set to lose its status as the UK's biggest provider of new mortgages after Abbey dramatically increased its share of the market.

In a fresh blow for the Edinburgh-based bank, Abbey, part of the Spanish Santander group, yesterday reported that it accounted for 26 per cent of all new home loans taken out in the first six months of 2008.

Meanwhile, responding to reports linking the Spanish bank with a possible break-up move on HBOS, Santander chief executive Alfredo Saenz said: "We are not interested in HBOS. We have what we want (in Britain]. We are very happy with Abbey, and Alliance & Leicester fits into that well."

Abbey's net mortgage lending rose to 8.3 billion, with an estimated market share of 16 per cent in the first quarter and 35 per cent in the following three months.

The figures make Abbey potentially the biggest net lender in the mortgage market. HBOS, the long-standing market leader, publishes its results for the first half of 2008 tomorrow.

HBOS remains the biggest overall mortgage lender, the Council of Mortgage Lenders (CML) confirmed last night. It revealed that as of the end of 2007, HBOS accounted for 20.1 per cent of the gross mortgage lending market, with Abbey second at 9.8 per cent.

But this year Abbey has benefited from changing market conditions and rival lenders withdrawing their offers, the bank added.

A spokesman for Abbey said: "We have not had to worry about write-downs, subprime or funding so we have had a market opportunity. We changed our strategy in September 2006 when we stopped aiming for market share and focused on profitability and prudent lending. That has not changed but the market around us has."

HBOS moved to a less aggressive mortgage lending strategy last year, focusing more on profitability, although it has cut mortgage rates three times in the past three weeks.

The average loan-to-value (LTV) ratio of new mortgages at Abbey increased to 67 per cent in the first six months of the year from 64 per cent in the same period in 2007, with just 1 per cent of new mortgages over 90 per cent LTV in the second quarter. But the number of properties at least three months in arrears climbed to 8,316, from 7,053 in the same period of 2007. Abbey said it expected house prices to end the year 7 per cent down on 2007.

Overall, Abbey increased its profits by 20 per cent in the first six months of this year, contributing 485m in profits to its parent group. Customers deposited 2.9bn in Abbey accounts, 50 per cent higher than in the same period last year, while credit card sales increased 135 per cent following the launch of the Abbey Zero card.

Santander recently agreed a 1.3bn takeover of Alliance & Leicester, potentially enabling it to further grow its mortgage market share.