Abbey has increased its mortgage lending by more than 10% since last year.

Despite the slowdown in mortgage lending, which is at its lowest level in terms of new mortgages since January 1999, Abbey has increased its share of net lending in the UK mortgage market to 15.9%, up from 4.9% a year ago. This signals the bank’s intention to grow its market share while many of its competitors struggle amid the credit crunch.

Abbey has been able to take advantage of the strong position of its parent company, Santander. While many global banks have been struggling to raise funding in the face of tightening credit markets and the failure of mortgage related financial instruments, Santander continues to thrive, posting a first quarter profit of E2.206 billion, slightly ahead of analyst expectations.

The landscape of the UK’s mortgage market has changed dramatically this year, from a position where lenders were competing to attract borrowers, to a position where borrowers are struggling to find competitive deals, and lenders are rejecting applicants that they would previously have accepted. In such conditions, Abbey, which still has a strong line of funding from its parent company, has been able to expand its market share.

While Abbey was the last lender in the UK to withdraw its 100% mortgage, in April, its new lending in the first quarter of 2008 was GBP2.9 billion, up from GBP1.3 billion in the same period of 2007.

The strong position of Santander can be contrasted with UK heavyweights RBS and HBOS, both of which have recently gone to shareholders with rights issues to raise additional finance. It can also be said to be reasonably similar to HSBC, which also has access to strong lines of funding and, as such, is increasing its share of the UK mortgage market.

In addition to its growth in the mortgage market, Abbey has recently launched a new credit card, having outsourced its cards business to MBNA for several years. The new credit card offers customers 5% cashback on their first GBP1,000 of purchases, and also has a 13 month interest free balance transfer period - making it one of the most competitive in the UK market.

The expansion of Abbey’s lending products in a time of tightening credit reveals a strategy of gaining market share during a time when other competitors are struggling to raise capital. Providing that Abbey chooses its customers well, this strategy should pay dividends in the future as the credit markets ease up.

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