The Mortgage Industry of the United Kingdom has traditionally been dominated by building societies , but from the 1970s the share of the new mortgage loans has declined substantially. Between 1977 and 1987, the share fell drastically from 96% to 66% while from banks and other institutions rose from 3% to 36%. The major lenders include building societies, banks, specialized mortgage corporations, insurance companies, and pension funds. During the four years following the Financial Crisis of the United Kingdom.

Mortgage lenders

Over the years, the share of the new mortgage loans market held by building societies has declined. Between 1977 and 1987, it fell drastically from 96% to 66% while from banks and other institutions rose from 3% to 36%. The banks and other institutions that made major inroads into the mortgage market during this period were helped by such factors as:

  • Relative managerial efficiency;
  • Advanced technology, organizational capabilities, and expertise in marketing;
  • Extensive branch networks; and
  • Capacities to tap cheaper international sources of funds for lending. [2]

By the early 1990s, UK building societies had succeeded in greatly slowing if not reversing the decline in their market share. In 1990, the corporations held over 60% of all mortgage loans taken over 75% of the new mortgage market – mainly at the expense of specialized mortgage loans corporations. Increased building societies aussi Their share of the personal savings deposits market in the early 1990s at the expense of the banks – Attracting 51% of this market in 1990 Compared with 42% in 1989. [3] One study found That in the five years 1987 -1992, the building societies collectively outperformed the UK. The societies’ share of the new mortgage loans market of 75% in 1990-91 was similar to the share level achieved in 1985. Profitability as measured by return on capital was 17.8% for the top 20 societies in 1991, compared with only 8.5% for the big four banks. Finally, bad debt provisions relative to advances were only 0.4% for the top 20 societies compared with 2.8% for the four banks. [4]

Though the building societies have lost a lot of money to the banks, they have only had two years of the total market at the end of the 1980s. However, in order to be able to do this, When the Abbey National Building Society converted into a bank in 1989, it could be considered as a major diversification of a building society into retail banking. Research organization Industrial Systems Research has achieved a high degree of integration in the financial services sector.

  • The introduction of new technologies, mergers, structural reorganization and the realization of economies of scale, and the increased efficiency in production and marketing operations. ;
  • Buying retail savings receipts, and reduced reliance on relatively expensive wholesale markets for funds (especially when internationally);
  • Lower levels of arrears, possessions, bad debts, and provisioning than competitors;
  • Increased flexibility and earnings from secondary sources and activities as a result of political-legal deregulation; and
  • (1). (2). (1). [5]

Mortgage types

The UK mortgage market is one of the most innovative and competitive in the world. There is little to be done in the market by the state or state funded by either mutual organizations ( building societies and credit unions ) or proprietary lenders (typically banks ). Since 1982, when the market was substantially deregulated, there was substantial innovation and diversification of strategies employed by lenders to attract borrowers. This has led to a wide range of mortgage types.

As Lenders drift Their funds Either from the money markets or from deposits, Most mortgages revert to a variable rate , Either the lender’s standard rate variable gold tracker rate , qui will tend to be linked to the Underlying Bank of England (BoE) repo rate (Or sometimes LIBOR). Initially they will tend to offer an incentive to attract new borrowers. This may be:

  • fixed rate ; Where the interest rate is constant for a period; Typically for 2, 3, 4, 5 or 10 years. Longer term fixed rates (over 5 years) whilst available, tend to be more expensive and / or have more onerous early repayment charges and are therefore less expensive than shorter term fixed rates.
  • capped rate ; Where similar to a fixed rate, the interest rate can not rise above the cap goal can vary beneath the cap. Sometimes there is a collar associated with this type of rate which imposes a minimum rate. Capped rate, eg 2, 3, 4 or 5 years.
  • discount rate ; Where it is set margin reduction in the standard variable rate (eg a 2% discount) for a set period; Typically 1 to 5 years. (Eg, BoE base rate plus 0.5% for 2 years) and sometimes the rate is stepped (eg 3% in year 1, 2% in year 2, 1% in year three) .
  • cashback mortgage; Where a lump sum is provided (typically) as a percentage of the advance eg 5% of the loan.

BoE rates more than 0.89%.

With each incentive the lender may be offering at least the cost of the borrowing. Therefore, they typically impose a penalty if the borrower repays the loan within the incentive period or a longer period (referred to as an extended tie-in ). These penalties used to be called Expired a redemption penalty or tie-in , HOWEVER since the onset of Financial Services Authority regulation They Are Referred to as an early repayment burden .


Mortgage lenders usually use salaries declared on wage slips to work out a borrower’s annual income and will usually lend to a multiple of the borrower’s annual income. Self-certified mortgages, informally known as “self cert” mortgages, are available to employed and self-employed people who have a deposit to buy a house but lack sufficient documentation to prove their income.

This type of mortgage can be beneficial to the people whose income comes from multiple sources, whose salary consists largely or exclusively of commissions or bonuses, or whose accounts may not show a true reflection of their earnings. Self cert mortgages have two disadvantages: the interest rates charged are usually higher than normal mortgages and the loan to value is usually lower.

These kinds of mortgages are banned from April 2014. ALTHOUGH They Have not been banned by the Financial Services Authority yet, They Are increasingly unusual to find since the UK credit crunch [6] When banks Have Become much more risk adverse and with recent mortgage Market reforms MMR where lenders are now required to demonstrate affordability. Contradictory ]

100% mortgages

Normally when a bank lends a customer money they want to protect their money as much as possible; They do this by asking the borrower to fund a certain percentage of the purchase property in the form of a deposit.

100% mortgages are mortgages that require no deposit (100% loan to value). These are some of the best buyers in the world.

Together / Plus mortgages

A development of the theme of 100% mortgages is represented by Together / More type mortgages, which have been launched by a number of lenders in recent years.

Together / More Mortgages represent loans of 100% or more of the property value – typically up to a maximum of 125%. Such loans are normally (but not universally) structured as a package of a 95% mortgage and an unsecured loan of up to 30% of the property value. This structure is mandated by lenders’ capital requirements which require additional capital for loans of 100% or more of the property value.

UK mortgage process

Arrangement fees and survey fees are components of the United Kingdom .

Arrangement fees

UK lenders usually charge a fee for setting up the mortgage.

Survey fee

The arrangement fee will be followed by a valuation fee , which pays for a chartered surveyor to visit the property. This is not a full survey so it’s not a problem. Also, it does not usually form a contract between the surveyor and the buyer, so the buyer has no right to sue in contract if the survey fails to detect a major problem. For an extra fee, the surveyor can usually carry out a building survey or a cheaper “homebuyers survey” at the same time. However, the buyer may have a remedy against the surveyor in wrong. [7]

International comparisons

In the UK variable-rate mortgages are more common, unlike the fixed-rate mortgage common in the United States. [8] [9] Home ownership rates are comparable to the United States. [8] In the UK, mortgage loan financing relies less on securitized assets (as mortgage-backed securities ) than the United States, Denmark and Germany, and more on deposits like Australia and Spain, At least 50% deposits. [8] [9] Thus, Lenders prefer variable-rate mortgages to fixed-rate mortgages to reduce potential interest rates between what they charging in mortgage interest and what they are paying in interest for deposits and other funding sources. [9] Prepayment penalties are still common, whilst the United States has discouraged their use. [8] Like other European countries and the rest of the world, but unlike most of the United States, mortgages loans are usually unrecognized debt , meaning debtors after foreclosure. [8] [10] [9] Prepayment penalties are still common, whilst the United States has discouraged their use. [8] Like other European countries and the rest of the world, but unlike most of the United States, mortgages loans are usually unrecognized debt , meaning debtors after foreclosure. [8] [10] [9] Prepayment penalties are still common, whilst the United States has discouraged their use. [8] Like other European countries and the rest of the world, but unlike most of the United States, mortgages loans are usually unrecognized debt , meaning debtors after foreclosure. [8] [10]


  1. Jump up^
  2. Jump up^ The Mortgage Loans Industry and Market: A Survey, ISR / Google Books, third rev. edn. 2008, page 16.ISBN 978-0-906321-44-7 [1]
  3. Jump up^ CSO Financial Statisticsand Building Societies
  4. Jump up^ Building Societies Research: Investing for the Next Millennium, UBS Phillips and Drew, London, 1992. (Quoted inThe Mortgage Loans Industry and Market: A Survey)
  5. Jump up^ The Mortgage Loans Industry and Market: A Survey, pages 15-16
  6. Jump up^ “How the Credit Crunch Effected the UK Mortgage Market” .
  7. Jump up^ Royal Institute of Chartered Surveyors
  8. ^ Jump up to:e Congressional Budget Office (2010). Fannie Mae, Freddie Mac, and the Federal Role in the Secondary Mortgage Market . p. 49.
  9. ^ Jump up to:c International Monetary Fund (2004). World Economic Outlook: September 2004: The Global Demographic Transition . pp. 81-83. ISBN  978-1-58906-406-5 .
  10. Jump up^ United Nations (2009). Forest Products Annual Market Review 2008-2009 . United Nations Publications . p. 42. ISBN  978-92-1-117007-8 .