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Lenders’ half-year results make for interesting reading

by: Melanie Bien
  • 09/08/2011
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Lenders’ half-year results make for interesting reading
August tends to be one of the quieter months as far as mortgage lending is concerned, with many people away on holiday.

However, it’s an interesting month in terms of gauging the strength of the market, with a number of lenders publishing their half-year results.

Mostly, it’s a tale of reduced profits or indeed considerable losses and further job cuts to come, certainly as far as Barclays and Northern Rock are concerned.

Even HSBC, a bank which boasted pre-tax profits for the first half of the year, is making tens of thousands of staff redundant, illustrating the problems the sector continues to face.

On the lending front, the picture is more or less gloomy, depending which lender you look at.

HSBC’s gross new mortgage lending grew 35% in the first six months of 2011, to £6.5bn, taking its share of the mortgage sector to nearly 11%.

Meanwhile, Northern Rock’s numbers fell 25% year-on-year. With £1.5bn of gross mortgage lending in the first half of the year, the lender said it was managing its lending for value over volume.

The average LTV of each lender makes for interesting reading, particularly as we are constantly told how many new products there are available at higher LTVs.

Northern Rock’s average LTV on new lending was 69%, compared to 60% in the first half of last year, showing the lender’s growing commitment to higher LTVs (because this is where it has identified greater profits to be made).

However, the average LTV of its mortgage book was 61%, up from 59% for the six months to December 2010, so a significant improvement as far as borrowers are concerned is likely to take some time.

Barclays’ average LTV on new lending increased from 51% in the first half last year to a slightly improved 53% this time around.

HSBC‘s average LTV is 53%, so while first-time buyers account for 28% of its borrowing in the past six months, many of them must have had significant deposits or help from their parents.

Lloyds was more generous on LTV, with an average of 61.3%, up from 60.9% in 2010.

As banks continue to make efficiencies, the outlook is bright for borrowers, as lenders compete with ever-lower mortgage rates.

However, it remains the case that the more cash a borrower can put into a purchase, or the more they can pay down their mortgage, the better off they will be in terms of a more favourable rate of interest and less stringent credit scoring.

Melanie Bien is director of Private Finance

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