Banks up but brokers wary

Four of the UK’s high street banks reported an increase in profits this week, but mortgage brokers said the outlook for the mortgage market was unlikely to improve.

HSBC, which has a number of best-buy deals, announced a doubling of its profits for the first six months of 2010 but said its total mortgage lending in the UK has only risen by 3 per cent.

Royal Bank of Scotland (RBS) saw an increase in gross lending, up 41 per cent from the first
quarter, but warned that the mortgage market showed “some signs of weakness” in the
second quarter, with application volumes 21 per cent lower than a year earlier.

Lloyds Banking Group maintained its 23 per
cent share of the mortgage market, while Barclays’ mortgage market share rose to 8 per cent.

“The main high street banks are doing the lion’s share of lending, boosting their share of the mortgage market in the past six months,” said Melanie Bien of Private Finance. “But while political pressure means they are demonstrating more of an appetite to lend, there is still some way to go.”

Bien said the low average loan-to-value ratios on new lending showed that high street lenders were continuing to take an extremely conservative stance on lending.

Barclays and HSBC reported a loan-to-value ratio on new lending of 51 per cent and 53 per cent respectively. “This is bad news for those with far more modest deposits,” Bien said.

Ray Boulger of John Charcol warned that lending could decline when the government’s support schemes – the Special Liquidity Scheme and the Credit Guarantee Scheme – end between 2011
and 2014.