"One of the possible explanations for this growth in the large banks could be a decline in lending from direct competitors, coinciding with the introduction of ring-fencing at the start of 2019."
The figures show that UK banks have shown strong annual growth, with specialist lenders performing well in the buy-to-let sector and seeing stable growth in the full market.
Specialist lenders increased their lending by £0.4bn in the full market and by £1.1bn in the buy-to-let market. Banks increased mortgage lending by £7.5bn and buy-to-let lending by £2.7bn.
Building societies saw a £1.8bn fall in total mortgage lending and a £1.1bn fall in buy-to-let lending.
In 2019, gross lending totalled £268bn, down 0.3% on 2018, while buy-to-let lending totalled £42.2bn, up 4.2% on 2018.
In terms of mortgage market share, the top ten biggest lenders remained in the same position as in 2018.
Lloyds Banking Group retained the top spot with a 19.7% share, although this figure dipped from 20.4% in 2018.
Nationwide (13.1%), Santander (11.4%), NatWest (10.1%) and Barclays (9.8%) completed the top five.
Callum Bilbe, analyst at UK Finance, commented: "One of the possible explanations for this growth in the large banks could be a decline in lending from direct competitors, coinciding with the introduction of ring-fencing at the start of 2019.
"Because UK retail banking is ring-fenced, it means there are only certain things that banks can do with the money from borrower deposits. As deposit levels are on average higher than lending levels, these large lenders have used surplus retail deposits in the ring-fenced organisation to increase mortgage lending.
"This increase in supply of mortgages has contributed toward the average price of new mortgages dropping significantly, as larger building societies and mid-tier lenders compete with the largest banks to attract borrowers to their products.
"This hasn’t reduced the diversity of the mortgage market, however, as specialist lenders continue to thrive in market segments where manual underwriting is required, such as for self-employed customers or those with more complex incomes. Larger, and to some extent mid-sized firms, are less able to compete in these segments as their largely automated systems are unable to provide the tailored approach to these loans that is required.
"Overall, despite this increase in market share from the largest banks, the mortgage market has remained competitive with a variety of different types of lenders catering for all borrower needs."
