Santander Tightens Their Lending

by Mark Johnston

It seems that Santander has provided tremendous support to the UK mortgage market, particularly over the past few years. It has been a major player in the market since the credit crunch started in 2008.

Santander UK figures have shown that its gross mortgage lending rocketed by 33% in the first few months of 2012. The lender carried out £5.6 billion of gross lending in these months compared with £4.2 billion in the same period last year. 

Data has shown that 10% of mortgage broker John Charcol’s business had gone toSantanderin 2011, this rose to 11.5% in early 2012.

However, despite these raised figures the lender has now announced it has tightened its appetite to lend, particularly to high loan to value (LTV) and interest only deals.

Banks such as Santander still lend out more than they take in from customer’s savings deposits, therefore making them more vulnerable to rising funding costs in the wholesale markets.

Santander in particular has a loan to deposit ratio of 138% and this is the main reason they have decided to pull back on their lending, thus allowing them to better align their lending and deposit funding.

The bank did however say “we remain committed to writing mortgage business, but we will adopt a more cautious approach”.

It is estimated that the Spanish banks share of lending through brokers has dropped from 25% to just 14% in recent months.

According to the Council of Mortgage Lenders (CML), gross mortgage lending fell by 19% in April, proofing that major lenders including Santander are scaling back their lending.

With rival lenders unable or unwilling to fill the void left bySantander, the mortgage market could seize up altogether, thus bringing the housing market to a sudden and abrupt halt.

Ben Thompson, head of the Legal and General Mortgage club, stated that “other lenders were trying hard to fill the hole left by Santander, but were finding it challenging because of funding”.

New players are also struggling to get in to the mortgage market as experts warn that regulations are hampering their chances to help keep the mortgage market ticking

Reports show that would be lenders, including Tesco bank, Home and saving Bank and Castle Trust, are hoping to be regulated but are still waiting for clearance from the Financial Service Authority (FSA)

Some experts believe that the cross border nature of banking means that banks in theUKcan not forever remain immune to the euro zone crisis and therefore a mortgage drought could push Britain’s housing market deeper in to crisis.

With more lenders already showing signs that they have less of an appetite to lend as the crisis continues, it will become even harder to get funding.

Richard Sexton, director of, the chartered surveyors, said “the mortgage market has gone in to reverse. Borrowers are being hit hard by rate rises and tightening lending criteria as banks scramble to protect their balance sheets from the impact of Greece leaving the euro zone”.

The Council of Mortgage Lenders (CML) chief economist, Bob Pannell, said “both confidence and funding could be affected by the renewed euro zone uncertainties”.

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