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Nationwide warned that mortgage arrears are creeping up but at a slower pace than expected, as profits at the UK’s third-largest mortgage lender were boosted by rising interest rates.
The building society flagged a slight uptick in bad loans in its half-year results, with 0.38 per cent of its residential mortgage portfolio behind on repayments for more than three months at the end of September, compared with 0.32 per cent at the start of April. It warned that inflation, economic uncertainty and high borrowing costs remained “key risks”.
“[Arrears] will continue to rise, [they] will creep up but it will be nothing as severe as we would have thought this time last year,” said chief executive Debbie Crosbie, a former TSB chief executive who took over as head of the building society last year.
Nationwide, which is owned by its members, slashed its provisions for loans that may not be repaid to £54mn. That was half of the amount it had set aside for bad loans over the same period last year, when it increased provisions more than three-fold to reflect a sudden deterioration in the economic outlook in the wake of former prime minister Liz Truss’s disastrous “mini” Budget.
Chief financial officer Chris Rhodes said the economic outlook remained unchanged one year on, adding that the housing market would stay “subdued” into the next year, but provisions for rising arrears were already accounted for in Nationwide’s books.
The lender provided about 31,000 first-time buyers with mortgages in the period, compared with 40,000 at the same time last year, reflecting squeezed affordability in the property market caused by high interest rates and the end of a government help scheme.
Crosbie said the building society would welcome any government initiatives that could help first time buyers get on the property ladder in the Autumn Statement next week.
The total balance of Nationwide’s residential mortgage book grew to £202.3bn at the end of September, up from £201.7bn at the start of April, in a sign of resilience for the lender in the face of a wider slowdown in house sales. Statutory profits before tax rose to £989mn in the six months to September 30, up from £969mn at the same time last year as rising interest rates boosted its earnings.
Nationwide’s net interest margin — a closely watched measure of the difference between the interest banks charge on loans and the rate they pays to consumers for deposits — rose year on year to 1.7 per cent, from 1.5 per cent.
Rhodes said Nationwide had given support to 5,000 borrowers through the mortgage charter initiative, a government-mandated initiative designed to help struggling borrowers, as of September and that the amount had risen to a total of 8,000 today.
UK lenders have been enjoying a boost from rising interest rates that is likely to soon come to an end, after the Bank of England earlier this month voted to hold its benchmark rate at 5.25 per cent — a 15-year high — for the second successive time. The decision signalled that the boom in interest income for the sector may wane.
Under Crosbie’s leadership, the building society rebranded itself and sought to position itself in contrast to large retail banks as it renewed its pledge to keep most of its branches in UK cities and towns open until 2026.
Source: Economy - ft.com
