The mortgage market has witnessed considerable change since its inception over 200 years ago. ...
Around twenty years ago, mortgage queues meant that building societies, which had a monopoly in the home loans market, could wait for customers to enter their branch, offer them a mortgage in the future, and then deal with them when they were ready.
There has been changes since then though, deregulation and technological developments have altered market conditions. ...
Home ownership was at a high in the early 1980’s, followed by the 90’s, when house prices fell for the first time ever, have changed the mortgage market. ...
The Competitive Market
The Halifax and Abbey National are the largest mortgage lenders in the UK, in terms of residential mortgage assets. These were the largest lenders, ranked by residential mortgage assets in 1999:
Rank Name of Group Residential mortgage assets (£bn) Estimated market share (%) Year Ended
1 Halifax plc 93. ... 6 31 Dec 99
4 Barclays Bank plc /Woolwich plc 44. ... 6 31 Dec 99
7 Alliance & Leicester plc 19. ... 9 31 Dec 99
8 Bradford & Bingley plc 17. ... 5 31 Dec 99
9 Northern Rock plc 15. ... 8 29 Feb 00
11 HSBC Bank plc 13. ... 7 31 Dec 99
12 Bristol & West plc 12. ... uk: 2001)
Halifax plc remains the largest mortgage lender in the UK with residential mortgage assets totalling £93 billion. This represented an estimated market share of nearly 19% of the overall outstanding mortgage book at the end of 1999. Abbey National plc was the second largest lender, with around 13% of the market, while Lloyds TSB and Barclays who have purchased building societies are third and fourth, while Nationwide the only remaining mutual building society in the top ten is fifth in mortgage providing.
At the end of 1999 the top five players had mortgage assets totalling £286 billion and accounted for 58% of the overall mortgage market, while the top 15 players accounted for 87% of outstanding balances. This shows that the mortgage market is highly concentrated among a relatively small number of big players whose roots are firmly entrenched in the financial services industry. ...
The traditional firms within the mortgage market are facing an increasing number of threats though. ... The traditional reliance on cross-subsidy pricing strategies is also becoming a problem, and this has allowed new entrants to target specific segments of the market, picking the most profitable customers. ... The companies like Halifax are responding to the increasing competition by aiming to maximise the benefit of new technology, particularly in distribution. This is an example of the recently launched UK Internet Banks 1998/2000:
Name Date Formed Services ATMs
First Direct April 1998 Current account, savings account, personal loans, bill payment, credit cards, mortgages, insurance, foreign exchange HSBC, Natwest
Virgin One May 1998 Mortgage/current account, mortgage/savings account, loans, credit cards RBS network
Egg October 1998 Current account, savings account, mortgages, personal loans, credit cards, e-commerce Link
First-E September 1999 Current account, savings account, brokerage, auctions None
Smile October 1999 Current account, savings account, loans, credit cards Link,
Post Office
Cahoot June 2000 Current account, credit cards, travel services Abbey National, Visa, Link
IF July 2000 Mortgages, personal loans, credit cards Halifax, Link
(Source: Keynote: July/August 2000)
At the same time though, Halifax are seeking to implement further cost reduction strategies, through rationalisation of their branch networks.
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