Thursday, 26 July 2012 2:32 PM
The two big banks part owned by the taxpayer both reduced their mortgage lending by £3.6bn last year despite exhortations by ministers to lend more money.
A ranking of the largest lenders by the Council of Mortgage Lenders (CML) reveals that Lloyds Banking Group (40 per cent owned by the taxpayer) reduced its lending from £30bn in 2010 to £28bn in 2011. Although it remained the number one lender, its market share slid from 22.2 per cent to 19.9 per cent.
Meanwhile, Royal Bank of Scotland (80 per cent owned by the taxpayer) reduced its gross lending from £16.2bn to £14.6bn. It dropped from fourth to fifth biggest lender and its market share reduced from 12.0 per cent to 10.4 per cent.
The mutually owned Nationwide Building Society increased its lending from £12.2bn to £17.1bn to grab third place and 12.1 per cent of the market. In 2010 it was in fifth place with 9.0 per cent.
Santander stayed at number two, although its share fell from 17.9 per cent to 16.8 per cent and its lending fell £500m to £23.7bn.
Barclays lent £200m less at £17.1bn and its 12.1 per cent share of the market meant it tied for third place with Nationwide.
HSBC increased its lending by £2bn to £13.3bn and its share from 8.3 per cent to 9.4 per cent to claim sixth place. The other 14 banks and building societies in the top 20 claimed 18.6 per cent of the market between them.
The figures are in sharp contrast to the peak of the market in 2007, when Lloyds and HBoS (which are now the Lloyds Banking Group) claimed 28.2 per cent of the market and lent £102.5bn.
The Nationwide, Barclays and RBS all have a bigger share of the market now despite lending less while HSBC actually lent £3.2bn more in 2011 now than in 2007.
Barclays, the Nationwide and Halifax (part of Lloyds) have all cut the rates on the fixed-term mortgages in the last few days following reductions by Santander and HSBC. However, price comparison site uswitch.com warned that although rates for five-year fixes have fallen, there are now fewer good value shorter-term fixes available.
Michael Ossei, personal finance expert at uSwitch.com, said: "The other worry for borrowers is the larger deposits now required to benefit from the best rates. The better long-term fixed deals now require a 40 per cent deposit on average. Very few are available to buyers with smaller deposits and these tend to come with a trade-off, such as an increase in up-front fees.
"What we need to see is more lenders starting to compete on fees and deposits as well as rates, allowing those who want to budget and protect themselves from future rate rises to do so without being too heavily penalised."