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UK Commercial Mortgages market report

Everything you need to make the right decisions

Providing the most comprehensive and up-to-date information and analysis of the Commercial Mortgages market, and the behaviours, preferences and habits of the consumer.

Mintel has the answers you’re looking for

What are the key challenges facing the industry and how fast are its rates of growth? Who is the consumer and what do they want? Where are the opportunities, where are the risks and what lies ahead?

Covered in this Report

This Report focuses on the UK commercial mortgage market, though market size data includes all lending secured by commercial property, including refinancing.

For the purposes of this Report, Mintel has used the following definitions:

Commercial property: all lending secured on UK commercial property and held on the balance sheet of lending organisations. This includes residential investment and development, but excludes owner-occupier residential mortgages.

Commercial property loan books: their net exposure to UK commercial property, excluding equity finance (i.e. net of any loan amounts sold down to other lenders and net of any securitised loans unless otherwise stated).

What you need to know

The commercial mortgages market regained some stability in 2017 after a significant decline in 2016, reflecting the immediate uncertainty introduced by the UK’s decision to leave the EU in June that year. The recovery in 2017 was underpinned by a strong second half to the year, with bolstered interest in commercial property, particularly in the offices and industrial sector.

Given continued economic uncertainty, the avoidance of further declines in 2017 surprised many in the industry. However, this success was contingent on unpredictable foundations. Ongoing uptake of new commercial property remains heavily tied to foreign investment, which could be impacted by the outcome of Brexit negotiations, while the decline of retail continues to blunt potential income.

The future therefore remains uncertain. However, there are signs of promise, especially growing interest in the regions, particularly in offices, and growth in committed but undrawn loans for development funding, which increased by 29.7% in 2017. This suggests confidence in the future of the British commercial sector, which should help inject additional capital into the market over the coming years.

Market Segmentation

  • Retail
  • Offices
  • Industrial
  • Other Commercial

Company Profiles

  • Barclays PLC
  • HSBC
  • Lloyds Banking Group
  • Royal Bank of Scotland Group
  • Santander UK PLC

Expert analysis from a specialist in the field

Written by Marco Amasanti , a leading analyst in the B2B sector, his extensive knowledge delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

Commercial borrowing levels recovered in 2017, bolstered by a strong second half of the year, as the market displayed resilience a year on from the lull that followed the EU referendum. This growth came as a surprise to many in the industry given the climate of uncertainty, with fears that heightened caution could subdue major financial commitments for a number of years. Marco Amasanti
B2B Analyst

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Table of contents

  1. Overview

    • What you need to know
      • Report coverage and product definitions
      • Executive Summary

          • The market
            • Intermediaries transact the lion’s share of mortgage business
              • Figure 1: Number of regulated residential mortgage sales, by sales channel, 2013-18
            • Slowdown in mortgage lending anticipated
              • Brexit delay heightens risk of a downturn
                • Regulatory update: Mortgage Market Study
                  • Companies and brands
                    • A heavily fragmented market
                      • PRIMIS is now the second-largest network, by number of ARs
                        • Countrywide is the UK’s largest broker
                          • The rise of the online broker
                            • The consumer
                              • Strong consumer appetite for home finance
                                • Figure 2: Expected mortgage-related borrowing activity over the coming year, by tenure, December 2018
                              • More mortgage borrowers prefer to do their own research than rely on an adviser
                                • Figure 3: Preferred way of arranging a mortgage/remortgage, by key target groups, December 2018
                              • Face to face is the preferred channel for mortgage advice
                                • Figure 4: Most preferred way of receiving mortgage advice, by key target groups, December 2018
                              • Low awareness of online broker brands among all homeowners
                                • Figure 5: Awareness of selected online mortgage brokers, by key target groups, December 2018
                              • Two thirds of prospective borrowers would consider using an online broker
                                • Figure 6: Consideration of online brokers and familiarity with ‘robo-advice’ concept, by key target groups, December 2018
                              • What we think
                              • Issues and Insights

                                • Mortgage advice channels viewed differently by existing mortgage holders and prospective first-time buyers
                                  • The facts
                                    • The implications
                                      • Online brokers can gain customers with the promise of free and fast services
                                        • The facts
                                          • The implications
                                          • The Market – What You Need to Know

                                            • Total mortgage lending grew by 5% in 2018
                                              • Intermediary share of new lending reached 72% in 2018
                                                • Regulator says market is working well but falls short of its vision
                                                  • Brexit delay increases the chance of market downturn
                                                  • Market Size – New Mortgage Lending

                                                    • Lenders and mortgage intermediaries see strong remortgage activity
                                                      • Figure 7: Volume of residential and buy-to-let mortgage sales, by purpose of loan, 2013-18
                                                    • Buy-to-let sees a small pick-up in sales, but pressures remain
                                                      • Remortgage business was worth £85 billion in 2018
                                                        • Figure 8: Value of residential and buy-to-let mortgage sales, by purpose of loan, 2013-18
                                                      • Market outlook: slower growth expected
                                                      • Mortgage Sales by Channel and Advice Given

                                                        • The vast majority of mortgage sales are advised…
                                                          • Figure 9: Number of regulated residential mortgage sales, by advice given, 2013-18
                                                        • …and a large and growing proportion are intermediated
                                                          • Figure 10: Number of regulated residential mortgage sales, by sales channel, 2013-18
                                                      • Market Drivers

                                                        • FCA assesses impact of MMR…
                                                          • …and believes further improvements could be made
                                                            • Industry bodies warn against putting too much focus on price alone
                                                              • Large target audience for mortgage advice
                                                                • Government intervention has helped stop the decline in home ownership
                                                                  • Increased popularity of short-term deals drives remortgage activity
                                                                    • Figure 11: When current mortgage deal is due to expire (fixed-rate mortgage holders only), December 2018
                                                                  • Brexit delay increases risk of a market downturn
                                                                    • Figure 12: Economic and housing market indicators (actual and predicted), 2018-20
                                                                  • Established brokers also face growing threat from online challengers
                                                                  • Companies and Brands – What You Need to Know

                                                                    • A heavily fragmented market
                                                                      • PRIMIS is now the second-largest network, by number of ARs
                                                                        • Countrywide is the UK’s largest mortgage broker
                                                                          • Mortgage advice is going digital
                                                                          • Market Composition and Key Players

                                                                            • 5,000 DA firms and over 14,000 ARs advise on regulated mortgage contracts
                                                                              • Largest national brokers
                                                                                • Largest networks
                                                                                  • Largest lenders
                                                                                    • Figure 13: Top 10 mortgage lenders, by gross lending, 2017
                                                                                  • Banking sector channels
                                                                                  • Digital Strategy and Innovation

                                                                                    • Lenders respond to changing customer habits with on-demand solutions
                                                                                      • L&C adopts hybrid digital proposition
                                                                                        • Who are the challenger brokers?
                                                                                          • Trussle
                                                                                            • Habito
                                                                                              • MortgageGym
                                                                                                • Mojo Mortgages
                                                                                                  • Others
                                                                                                    • What’s happened to Dynamo?
                                                                                                    • The Consumer – What You Need to Know

                                                                                                      • Strong consumer appetite for home finance
                                                                                                        • Many mortgage borrowers like to do their own research
                                                                                                          • Face to face is the preferred channel for mortgage advice
                                                                                                            • Low awareness of online broker brands among all homeowners
                                                                                                              • Two thirds of prospective borrowers would consider using an online broker
                                                                                                              • Expected Mortgage-related Activity in 2019

                                                                                                                • Around a quarter of UK adults have a mortgage
                                                                                                                  • Figure 14: Segmentation of total sample, by housing situation, December 2018
                                                                                                                • 19% of mortgage holders expect to remortgage within the next 12 months
                                                                                                                  • 8% of outright owners are planning to take out a home mover loan
                                                                                                                    • Figure 15: Expected mortgage-related borrowing activity over the coming year, by tenure, December 2018
                                                                                                                  • 22% of private renters have aspirations to take out a mortgage
                                                                                                                  • Preferred Method of Arranging a Mortgage

                                                                                                                    • More mortgage holders prefer to select a product themselves than use a broker...
                                                                                                                      • Figure 16: Preferred way of arranging a mortgage or remortgage, by key target groups, December 2018
                                                                                                                    • …but preferences are more evenly split among prospective mortgage customers
                                                                                                                      • Price comparison sites are a handy tool for those who know what they want…
                                                                                                                        • …but online brokers offer the same and more
                                                                                                                          • Most advice seekers prefer to converse face to face…
                                                                                                                              • Figure 17: Ways willing to receive mortgage advice (ranked in order of significance), by key target groups, December 2018
                                                                                                                            • …with 69% saying this is their most preferred channel
                                                                                                                              • Figure 18: Most preferred way of receiving mortgage advice (ranked in order of significance), by key target groups, December 2018
                                                                                                                          • Awareness of Online Brokers

                                                                                                                            • Awareness is limited among wider mortgage-owning population…
                                                                                                                              • Figure 19: Awareness of selected online mortgage brokers (ranked in order of most well known), by key target groups, December 2018
                                                                                                                            • …but higher among prospective remortgagors and new mortgage customers
                                                                                                                              • Trussle has work to do to catch up with rivals
                                                                                                                              • Online Advice – Assessing Attitudes and Potential

                                                                                                                                • Around two thirds of prospective applicants could be tempted to consider online brokers…
                                                                                                                                  • Figure 20: Consideration of online brokers and familiarity with ‘robo-advice’ concept, by key target groups, December 2018
                                                                                                                                • …but a third would prefer to deal with a person
                                                                                                                                • Appendix – Data Sources and Abbreviations

                                                                                                                                    • Abbreviations
                                                                                                                                      • Consumer research methodology