ISBN 1-85765-642-3

Executive Summary

Table of Contents

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EXECUTIVE SUMMARY

At the start of 1999, many forecasters were predicting subdued or negative growth in the annual value of UK gross mortgage lending. However, business in the first half of the year has been considerably better than anticipated. Key Note estimates that, by the end of the year, gross advances will reach just over £92bn, an increase of 2.8 percent against the figure for 1998.
The conversion of several building societies to bank status has boosted the banking sector's share of loans approved for house purchase in the UK to the extent that, by 1998, 65.4 percent of the nation's mortgage book was in its hands. However, new market entrants such as supermarkets, life insurers and others are bringing new competition and product innovation, with increases in telephone selling, a growth in Internet marketing and the imminent arrival of interactive digital television.
Key Note estimates that in 1998, Halifax retained the market lead in gross advances (15.9 percent), followed by Abbey National (14.5 percent) and Lloyds TSB (10.4 percent), but its share of net mortgage advances was low as a result of a late entry into remortgaging.
The top ten list for 1998 contains only two building societies -- one of which has since opted for conversion -- leaving a solitary Nationwide fighting the corner for mutuality.
The market also faces considerable uncertainty from a surge of Government activity, which, after disposing of Mortgage Interest Relief At Source (MIRAS), now promises to review banking services, and has introduced The Mortgage Code and a consultation paper on the house buying process. Even more uncertainty is felt through the potential impact of European Monetary Union (EMU), the introduction of the Euro and the future impact of European cross-border marketing.
Since 1961, the number of UK dwellings has increased by almost 10 percent, and in 1997, more than half the heads of households aged between 25 and 34 were purchasing a house with a mortgage. In 1997, the average house price in London was £105,800, almost double that paid in Northern Ireland. In 1988, endowment mortgages represented 83 percent of new mortgages, but by 1996 more people were taking out standard repayment mortgages, and more recently fixed-rate lending has become popular.
The UK is now a low inflation economy, and in this changed economic environment the housing market should not be expected to demonstrate the same volatility witnessed during the early 1990s. Key Note forecasts that in the 5 years between 1999 and 2003, there will be a much shallower growth curve in the annual levels of UK gross mortgage lending. Between 1999 and 2003, this will increase steadily -- but unspectacularly -- to reach £110.25bn, a total growth over the period of 19.8 percent at current prices, which in real terms (at constant 1998 prices) is an increase nearer to 8.4 percent.

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TABLE OF CONTENTS

Executive Summary

Market Definition

INTRODUCTION

MARKET SECTORS

MARKET POSITION

MARKET TRENDS

Table 1: Non-Converting UK Building Societies by Number of Branches, May 1998

Table 2: Number of UK Loans Approved for House Purchase by Type of Lender (000), 1994-1998

Table 3: UK Residential Property Transactions (000), 1994-1998

Table 4: Residential Property Transactions by Region (000 in England and Wales), 1994-1997

Table 5: Mix Adjusted UK House Price Indices at Mortgage Completion Stage (index 1993=100), 1994-1998

Table 6: Mix-Adjusted UK House Prices at Mortgage Completion - All Houses by Region (£000), 3rd Quarter 1998

Table 7: Gross Advances by Mortgage Type ( percent loans by number and value), 1997 and 1998

Table 8: Mortgage Arrears and Repossessions (000 and percent of all loans), 1994-1998

Table 9: Levels of Owner-Occupation in the European Union Member States ( percent), 1997

Table 10: Residential Mortgage Loans as a percentage of National Gross Domestic Product (GDP) in the European Union Member States, 1997

Market Size

THE TOTAL MARKET

Table 11: UK Mortgage Lending Market by Gross and Net AdvancesÅ (£m and index 1994=100), 1994-1998

Table 12: UK Gross Advances by Source and ValueÅ (£m and percent share), 1994-1998

Table 13: UK Balances Outstanding (£m and percent of total), 1994-1998

Table 14: UK Gross Advances ( percent number of loans), 4th Quarter 1998

Table 15: Gross Advances for House Purchase - All Buyers in the UK (number, £ and percent), 1997 and 1998

Table 16: NHBC Registered Builders' New House Starts by Quarter and Year (units), 1997 and 1998

Table 17: First Time Buyers' Ability to Buy Index, 1994-1999

Industry Background

RECENT HISTORY

INDUSTRY CONCENTRATION

DISTRIBUTION

TRADE ASSOCIATIONS

Table 18: Branch Networks of Leading UK Banks and Building Societies, 1993-1998

Table 19: Staff Numbers in Major UK Banks and Building Societies, 1993-1998

Competitor Analysis

THE MARKETPLACE

MARKET LEADERS AND THEIR BRANDS

ADVERTISING AND PROMOTION

Table 20: Leading UK Mortgage Lenders by Net Advances, Gross Advances and Mortgages Outstanding at Year End (£bn and percent share), 1998

Table 21: Profile of Abbey National PLC (£m), 1994-1998

Table 22: Profile of Alliance & Leicester PLC, 1994-1998

Table 23: Profile of Barclays PLC Home Loans (£m), 1994-1998

Table 24: Profile of Bradford & Bingley Building Society (£m), 1994-1998

Table 25: Profile of Halifax PLC, 1994-1998

Table 26: Profile of Lloyds TSB Group PLC (£m), 1996-1998

Table 27: Profile of National Westminster Bank PLC (£m), 1994-1998

Table 28: Profile of Nationwide Building Society (£m), 1994-1998

Table 29: Profile of Northern Rock PLC, 1994-1998

Table 30: Profile of Woolwich PLC, 1994-1998

Table 31: Main Media Advertising Expenditure of Mortgage Providers (£000), Year to December 1998

Strengths, Weaknesses, Opportunities and Threats (SWOT)

STRENGTHS

WEAKNESSES

OPPORTUNITIES

THREATS

Buying Behaviour

DEMOGRAPHICS

Table 32: Mortgages in Great Britain by Type and Source ( percent of adults), 1994-1998

Table 33: Households in Great Britain by Size ( percent of total), 1961-1998

Table 34: Tenure of Households in England by Type of Accommodation ( percent), 1997/1998

Table 35: Age of Heads of Households in the UK by Tenure ( percent), 1996/1997

Table 36: Heads of Households Among Ethnic Groups in England by Tenure ( percent), 1997/1998

Table 37: Tenure in Great Britain by Length of Time at Current Address ( percent), 1996/1997

Table 38: Tenure in England by Main Reason for Moving ( percent), 1997/1998

Table 39: Types of Dwelling in the UK by Construction Date ( percent), 1996/1997

Table 40: Housebuilding Completions in England and Wales by Number of Bedrooms ( percent), 1971-1997

Table 41: Average Weekly Household Expenditure on Housing Costs in the UK by Tenure (£ per week), 1997/1998

Table 42: Average UK Dwelling Prices by Region (£000), 1997

Outside Suppliers to the Industry

MORTGAGE FUNDS

WHOLESALE MONEY MARKETS

MONEY TRANSMISSION SERVICES

PAYMENTS MARKET OVERVIEW

TECHNOLOGY

CROSS-SELLING SOFTWARE

NEW CHANNELS

YEAR 2000 BUG AND THE EURO

TRAINING

SELECTION AND REMUNERATION

Current Issues

THE IMPACT OF THE EURO ON FINANCIAL MARKETS

THE MORTGAGE CODE

HOUSE BUYING PROCESS

CREDIT UNIONS

COUNTRYWIDE HOME LOANS

FLAT-RATE MORTGAGES

INTERNET-BASED MORTGAGE SCHEME

HOMESMART

BANKING INDUSTRY REVIEW

CUSTOMER COMPLAINTS

CUSTOMER PROFILING

DIGITAL TELEVISION SERVICES

NATIONAL SAVINGS BANK

CHELSEA BUILDING SOCIETY

BARCLAYS PLC

ALLIANCE & LEICESTER AND BANK OF IRELAND MERGER

Forecasts

ECONOMIC BACKGROUND

THE MORTGAGE MARKET

FORECASTS 1999 TO 2003

Table 43: Forecast UK Gross Mortgage Advances by Value at Current Prices (£m ), 1999-2003

Table 44: Forecast UK Gross Mortgage Advances by Value at Constant 1998 Prices (£m), 1999-2003

Company Profiles

INTRODUCTION

DEFINITIONS

FURTHER INFORMATION

Further Sources

ASSOCIATIONS

PERIODICALS

DIRECTORIES

GENERAL SOURCES

HOPPENSTEDT BONNIER INFORMATION SOURCES

GOVERNMENT PUBLICATIONS

OTHER SOURCES

Text © 1999 Key Note

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Last updated by Jacob van Eldik 24th January 2000