Several building societies increased their share of the UK mortgage market last year while some of the biggest lenders saw a decline, new figures show.

Lending remains “heavily concentrated” in the hands of the six largest lenders – Lloyds Banking Group, Santander, Barclays, Nationwide Building Society, the Royal Bank of Scotland (RBS) and HSBC – the Council of Mortgage Lenders (CML) said.

The six largest lenders advanced mortgages worth £113.8 billion (€145.3 billion) in 2011, compared with £110.8 billion (€141.4 billion) the previous year, but despite this increase, their total market share declined modestly to 80.7 per cent last year, from 81.9 per cent in 2010.

The figures for loans advanced last year also reveal a pattern of larger mutual lenders increasing their place in the market, with Nationwide, Yorkshire, Coventry, Skipton and Leeds building societies all increasing their share.

HSBC, which recently launched a five-year fixed mortgage deal with a record low rate, was the only bank out of the biggest six mortgage lenders to increase its share, to 9.4 per cent.

The CML said that ING Direct had been “by some distance” the fastest-growing lender in relative terms over the last two years.

Ranked as the 10th largest lender, ING Direct advanced mortgages worth £3 billion (€3.8 billion) last year, compared with £1.1 billion (€1.4 billion) in 2010 and £100 million (€128 million) in 2009.

Lloyds Banking Group retained its position as the biggest mortgage lender, but its estimated market share decreased from 22.2 per cent in 2010 to 19.9 per cent last year.

The second biggest lender, Santander, also saw a slight decrease in its share, which dropped to 16.8 per cent in 2011.

RBS’s estimated share was also slightly eroded to 10.4 per cent last year.

Barclays’ share also decreased to 12.1 per cent, despite the bank increasing its mortgage lending in 2011.

Lending is expected to remain tough this year amid continued economic uncertainty and the British Bankers’ Association (BBA) previously reported that mortgage approvals fell to their lowest level in at least 15 years last month.

Several lenders have announced rate cuts in recent days following more favourable swap rates, but much of the competition surrounds borrowers who are seen as less “risky”, with hefty deposits of around 40 per cent.

Borrowers with smaller deposits are expected to have a particularly tough time finding a deal as lenders tighten their borrowing criteria.A ‘funding for lending’ scheme recently announced by the Bank of England and the Treasury could ease some problems by providing access to cheaper funding, but the CML has said the scheme is not just about mortgages and is broadly targeted at encouraging all types of lending to non-financial businesses and individuals.

“It is far from being just about mortgages, and there are no specific targets for mortgage-directed lending,” the CML said.

It said that as not all mortgage lenders would have access to the scheme, those who did not may find themselves at a disadvantage.

The CML said the funding for lending scheme could make loans cheaper and more readily available than they might otherwise have been if the scheme did not exist.

Lending facts

Largest mortgage lenders by gross lending, with the amount lent in billions last year and the estimated market share in 2011, followed by the same figures for 2010:
1. Lloyds Banking Group: £28, 19.9%; £30, 22.2%
2. Santander: £23.7, 16.8%, £24.2, 17.9%
3. Barclays: £17.1, 12.1%; £16.9, 12.5%
3. Nationwid: £17.1, 12.1%; £12.2, 9%
5. The Royal Bank of Scotland: £14.6, 10.4%; £16.2, 12%
6. HSBC: £13.3, 9.4%; £11.3, 8.3%
7. Northern Rock: £4.9, 3.5%; £4.2, 3.1%
8. Yorkshire Building Society: £4.1, 2.9%; £2.8, 2.1%
9. Coventry Building Society: £4, 2.8%; £3.5, 2.6%
10. ING Direct: £3, 2.1%; £1.1, 0.8%
11. Clydesdale Bank: £2.7, 1.9%; £1.7, 1.3%
12. Co-operative Financial Services: £1.6, 1.1%; £3.3, 2.4%
13. Skipton Building Society: £1.5, 1.1%; £0.4, 0.3%
14. Leeds Building Society: £1.2, 0.9%; £1, 0.7%
15. Principality Building Society: £0.8, 0.6%; £0.8, 0.6%
15. Bank of Ireland: £0.8, 0.6%; £1.2, 0.9%
17. UBS: £0.4, 0.3%; £0.1, 0.1%
17. Nottingham Building Society: £0.4, 0.3%; £0.4, 0.3%
17. Aldermore Mortgages: £0.4, 0.3%; £0.1, 0.1%
20. Aviva Equity Release: £0.3, 0.2%; £0.4, 0.3%