BANKS

Although some smaller banks moved into mortgage lending in the 1970s, the main high street banks only became major players in the 1980s. Initially, they concentrated on lending to their own account-holders only, but nowadays they will lend freely to all who meet their lending criteria. Currently, banks account for roughly one third of all mortgage lending.

Banks rely less on small-scale savings to finance their lending when compared to building societies. The financing of their lending comes mostly from the London money market and their interest rates are often linked to the cost of money in that market. They are, therefore, more likely to move their interest rates relatively quickly in line with changes in the Bank of England’s base lending rate.

Banks have been innovative in the mortgage lending market and may be prepared to lend in circumstances in which other mainstream lenders may not. They tend, for example, to be less concerned in circumstances where the borrower intends using part of their home for business purposes.