Lloyds Banking Group (LLOY) has been named the UK's biggest mortgage lender, closely followed by Santander and Nationwide.

Following several banks joining forces to weather the credit crunch, and specialist lenders going bust, it now appears that just a handful of lenders are keeping us in mortgage loans.

Lloyds, Santander and Nationwide, as the top three lenders, together controlled 55% of the market in 2008 and collectively approved 142.2 billion of mortgages.

And the top six firms (full list below) last year accounted for 78% of all new home loans. The Council of Mortgage Lenders (CML), which compiled the list, says the main players within the mortgage market have changed dramatically since 2007, as a result of the lack of funding for banks, the banking crisis and several firms disappearing.

Smaller banks and building societies have moved up the list as a result of the changes, with the likes of Yorkshire and Clydesdale banks moving from 15th largest in 2007 to ninth largest last year.

Northern Rock, meanwhile, has moved from the fourth biggest lender in 2007 to the 11th biggest, while HSBC (HSBA) - which has only recently taken a serious interest in mortgage lending - jumped two spots to become the sixth largest mortgage lender. The global banking giant is likely to have gained an even larger market share so far in 2009.

Overall new lending fell by 28% last year; gross lending totalled just 261 billion, well below its peak of 364 billion in 2007.

Bernard Clarke, spokesman for the CML, says: "Typically, our table of the largest 30 lenders shows only a handful of changes from year to year. This year, however, it has a much less familiar look, showing just how much has changed in the last year or so."

The lack of wholesale funding for lenders has had a dramatic impact on specialist players, which typically lent sub-prime, buy-to-let and self-certification loans through brokers rather than directly to borrowers. In 2007, these types of lenders accounted for more than 7% of gross lending, but their share has now shrunk to just 2%.

HBOS, the banking group consisting of Halifax and Bank of Scotland, has in previous years taken the top spot in the CML's table of the 30 top lenders. Its merger with Lloyds' TSB has seen the latter bank move from second positive (with Cheltenham & Gloucester) and third position to dominate the top spot.

Santander is also a relatively new name to the list, although its UK banks - Abbey and Alliance & Leicester - have long had a high profile in the list.

To make the comparison between 2008 and 2007 more meaningful, the CML says it has had to rework the figures as if the merger and acquisitions activity that took place in 2008 had occurred earlier.

Going forward, the CML expects 2009's figures to show even more changes, with more names moving up and down the ranks, and an even larger market share in the hands of the largest firms.

"While some specialist lenders remain in the list for last year, we would expect shrinkage of this sector to continue while current market conditions persist," says Clarke. "Meanwhile, the lending commitments from the nationalised and part-nationalised banks suggest yet more growth in market share for this sector. And, of course, we may not have seen the end of the current wave of consolidation."

Cheltenham & Gloucester may live to see another day on the high street after Lloyds Banking Group (LLOY) said it was rethinking plans to close the 164-strong branch network.

Back in June, the banking group - which was recently named the UK's largest mortgage lender - revealed plans to close the branch network, making 1,660 staff redundant. However, it said the brand would be retained with a focus on online savings accounts and sales of mortgages through brokers.

In a twist to the tale, Lloyds has now announced that it may in fact double back on this decision - but whether this means Cheltenham & Gloucester branches will remain open or be sold to another bank remains to be seen.

In a statement, the bank says: "Lloyds Banking Group is reviewing the planned closure of the Cheltenham & Gloucester branch network."

It adds that affected Cheltenham & Gloucester staff have been informed of the potential changes, and that customers should continue to use their branches as usual.

David Buik, economist at BGC Partners, doesn't believe there is any reason for Lloyds to keep its Cheltenham & Gloucester branch network open.

"Frankly one brand is enough - Lloyds increased its market share for mortgages from 28.2% to 28.6% by the end of 2008," he adds. "Sadly, Cheltenham & Gloucester is superfluous to requirement."

One alternative is to sell Cheltenham & Gloucester altogether. Buik says: "Selling Cheltenham & Gloucester would put some much needed money in the bank. Closing it would cut costs. Management is decent and this mortgage lender would fit very snugly into a retail bank's portfolio."

Others suggest that the volte-face indicates that Lloyds could be considering a sale to appease competition concerns of the European regulators. Lloyds is currently waiting to be given the go-ahead to use the state-backed asset protection scheme for 260 billion of its toxic assets.

The European regulator has already suggested that Lloyds would need to reduce its presence in the mortgage and deposits market in order o get approval.

Names in the frame to purchase Cheltenham & Gloucester include Barclays (BARC), which only has a 6.6% share of the mortgage market through Woolwich, National Australia Bank and even HSBC (HSBA). However, with the credit crunch still causing financial pain for most banks, it may be tough to clinch a sale.

Analysts also point out that finding a buyer could prove a difficult task as low interest rates means savings are loss making while lenders would rather write new mortgages than acquire a book which may come with potential problems.

Shares in Lloyds were continuing their good form from yesterday, up over 3% to 102.1 today.