The UK mortgages market is as busy as it has ever been and is attracting new customers all the time, according to an industry body...

While interest rates have undergone four successive rises in the past twelve months, the housing market has not slowed down and indeed has if anything become busier.

The Council of Mortgage Lenders (CML) is a trade association for the mortgage lending industry and its members account for around 98 per cent of UK residential mortgage lending. As such, it is well positioned to notice any new trends in the mortgage lending sector.

A spokesman for the body revealed this week that it is becoming increasingly apparent that the mortgage industry is going through something of a period of change.

Traditional dominance of big lenders ‘challenged’

Increased competition is challenging the traditional dominance of the big lenders, such as HBOS. Earlier this week, the Guardian reported that the bank - the fourth biggest lender in the UK - had seen its share of the mortgage market decline considerably.

HBOS now accounts for eight per cent of all British mortgage lending - compared to a previous high of 21 per cent - and rivals are apparently afraid that it will enter into "an aggressive pricing campaign" to regain some of its lost ground. An industry insider said that such a move would provoke "a pricing war between mortgage lenders".

CML spokesperson, Christopher Dean, said that HBOS "are the biggest lender so of course anything they do will have an impact upon other mortgage lenders".

He added: "The mortgage market is a very dynamic market; it's very changeable, and it's a very competitive market as well. If HBOS does take an especially aggressive stance to pricing, other lenders will probably find a way of coming up with something as equally as good for their customers."

"It's a very competitive market and lenders are very, very aware of tightening profit margins and so they won't just let HBOS walk all over them."

Good news for consumers

This would of course be good news for anybody who is thinking of taking out a mortgage. Competition is always good for the consumer and may help to offset the effects of the recent interest rate rises.

On Monday, Bank of England governor Mervyn King warned that further base rate increases are likely in the near future, based on economic indicators, in particular high inflation and high consumer spending.

In a recent survey of economic analysts undertaken by Bloomberg, many were confident that interest rates would top six per cent by the end of 2007.

Source:  www.reuters.co.uk