Nationwide mortgage arm hit by squeeze on consumers

Nine-month profits down 6% at building society But group sees 8% rise in accounts to 617,000

Nationwide building society’s share of the UK mortgage lending and its overall profits have fallen amid fragile consumer confidence, the group revealed yesterday.

The mutual said its overall gross mortgage lending declined 8 per cent to £24.1 billion in the nine months to enddecember 2017 from £26.2bn in the same period of 2016.

That saw its total share of the home loans market contract more than 2 per cent to 12.2 per cent. Nationwide’s net mortgage lending market share – gross lending minus repayments and redemptions – slumped to 11.2 per cent from 29.3 per cent.

Nationwide chief executive Joe Garner said: “As we anticipated, a subdued buy-to-let mortgage market, plus sustained competition, slowed the pace of growth in our mortgage book.”

However, he added: “With third-quarter mortgage reservations significantly stronger than for the same period last year, we expect a strong final quarter for our gross lending.”

It came as the society reported a pre-tax profit of £886 million for the nine months, down 6 per cent from £946m a year earlier. Garner said: “Household spending, a key driver of growth, lost momentum. Retail sales and car registrations have slowed and consumer confidence has also softened.

“We are seeing a lot of affordability pressure, not just unsecured lending but inflationary pressures coming through in a lot of ways… including pressure on rents.”

He said that with about one in three people in the UK having little or no material savings, inflation was squeezing household budgets and hitting consumer confidence.

Even so, Nationwide said its currentaccountopeningsrose 8 per cent to 617,000.

The society said its net interest margin – the difference between what it charges borrowers and pays savers – held steady at 1.33 per cent in the nine months, but would likely decline this financial year and next.

The group saw underlying pre-tax profit edge up 2 per cent to £883m, aided by the £26m sale of its payments system Vocalink and a £100m one-off gain from the disposal of Visa Europe. Garner said that he expected the UK economy to grow “modestly”, and that this was “also likely to hold back the housing market and house price growth”.

An analyst said: “Nationwide’s performance is durable rather than spectacular. But that is likely to embrace other banks as well this time round.”

mflanagan@scotsman.com