Nationwide’s lending down 31pc after fall in buy-to-lets

Increased tax on landlords squeezes their returns after flurry of borrowing to beat the rise in stamp duty

NATIONWIDE has seen its mortgage lending dive on last year as the Government’s tax crackdown on buy-to-let landlords chills the market.

Net mortgage lending by the building society fell 31pc to £2.4bn for the period covering April 5 to June 30 as buy-to-let lending shrank by half to £800m.

The slowdown in buy-to-lets comes after stamp duty on additional properties was increased last year. Meanwhile tax relief on buy-to-let investments changed in April and rents continue to fall, squeezing returns for landlords.

Investors swamped the buy-to-let market early last year as they tried to buy properties before the extra stamp duty came through, with activity plunging since. The Royal Institution of Chartered Surveyors warned this week that house price growth and market activity had ground to a halt.

With demand shrinking, Nationwide – the UK’S second largest buy-to-let lender behind Lloyds Banking Group – saw its profits dip 20pc on a year ago to £322m, with its share of the mortgage market slipping from 15pc to 13pc.

Profits were also affected by the sale of its investment in Visa Europe this time last year, however, which gave Nationwide a £100m one-off gain for that quarter. While mortgage lending dropped during the period the group did see 202,000 new accounts open in the quarter, up 17pc from the 173,000 opened a year ago. That stands in contrast to the thousands of accounts closed at the Co-op Bank during the first half, although Nationwide boss Joe Garner said more of its new customers came from large incumbent banks.

However the chief executive struck a tone of caution to fellow lenders, warning that they had to carefully balance “credit supply with affordability” and react to conditions without going too far. Making his point in the week of the tenth anniversary since the start of the financial crisis, he said that while the public has become less optimistic about the outlook of the economy Nationwide research showed that most people do not expect Brexit to dent their ability to access credit.

That means lenders have to “support the long-term interests of consumers in a responsible way”, he said. The group expects the economy to slow this year as rising inflation squeezes household budgets.

Mr Garner’s comments come a month after the Bank of England warned lenders they “may be dicing with the spiral of complacency” as car loans, credit card balances and personal loans far outpace rises in income, with borrowers racking up debt.

“Lending standards can go from responsible to reckless very quickly,” the Bank’s executive director for financial stability Alex Brazier said in July.

Research by EY Item Club also warned yesterday that household disposable incomes are set to decline this year for the first time since 2013, a dip likely to dampen demand for mortgages heading into 2018. “Business lending, mortgage lending and general insurance look set to be the hardest hit,” said Omar Ali, EY’S UK financial services managing partner. “Despite warnings from the Bank of England and some high-street lenders, the only type of lending that is expected to grow in 2018 is consumer credit.”