Big lenders hit hardest by credit crunch

By Jennifer Hill

LONDON (Reuters) - Britain's largest mortgage lenders are suffering the most from the credit crunch, which has hit their competitiveness more than their smaller rivals, data shows.

Less than a third of the top mortgages on the market today come from the country's 10 largest lenders, according to price comparison Web site Moneyfacts.co.uk.

These lenders, which accounted for three-quarters of gross mortgage lending in 2006, offer just 68 of the leading 250 mortgage products -- 27 percent.

The fallout from the credit crunch and a slowing housing market have forced lenders to consider their position in the market and reassess their attitude to risk-based lending.

That has seen them scrap cheap fixed-rate deals and 100 percent-plus loans, and tighten their lending criteria.

The tough environment has hit thousands of mortgage borrowers, many of whom are facing "payment shock" when current mortgage deals expire.

Denise Harvey, a mortgage analyst at Moneyfacts, said: "Post credit crunch, some of the larger lenders have appeared to have suffered the most; previously they had been able to fund a large section of their lending through the money markets, but today that just isn't possible."

However, larger banks with smaller subsidiary companies -- such as the Royal Bank of Scotland (RBS) group, which owns the First Active, NatWest and Direct Line brands, as well as Ireland's Ulster Bank -- appear to be better weathering the storm.