Nationwide warns of cooling housing market this year

Boss says consumers ‘adapting their behaviours’ as budgets are squeezed

By Nationwide Building Society has warned of a “subdued” UK housing market in the months ahead with little growth in prices after posting a fall in profits.

Britain’s biggest building society said people were “adapting their behaviours” in response to a squeeze on disposable incomes.

The lender, which took over the profitable core of Dunfermline Building Society in 2009 when the latter was laid low by risky property deals, said statutory pre-tax profits fell to £281 million in the three months to 30 June, from £322m over the same period last year.

However, it noted that it was up against tough comparative figures, with last year’s numbers boosted by its £26m Vocalink disposal.

Underlying profit for the quarter was also lower, however, coming in at £270m, down from £301m last year.

Thenumberofnewaccounts opened over the period was 186,900, down from 202,000 a year earlier, though member deposit balances grew by £4.2 billion thanks to a strong performance from individual savings accounts (ISAS). Gross mortgage lending lifted 3.7 per cent to £8.4bn.

Chief executive Joe Garner said he expected tough competition in the months ahead.

He said: “Our outlook is unchanged from the full year, and we expect the economy to grow at a modest pace over the next 12 months.

“We are observing consumers adapting their behaviours in response to the pressure on disposable income.

“The housing market looks set to remain relatively subdued with house prices broadly flat in 2018. Against this background, we also expect intense competition to persist in our core markets.”

Garner noted that consumer expectations of service were continuing to “evolve rapidly”, as digital technology transforms how people manage their money.

“Therefore, we are progressing the review of our technology strategy to ensure Nationwide stays well ahead of future needs, and that we continue to pioneer legendary service in a digital age,” he added.

Nationwide said costs for the year were in line with expectations, adding that it remains “committed” to its efficiency programme.

The society is currently targeting savings of some £300m by 2022, and said it would update on its progress at the time of its interim results in November.

Nationwide noted that its net interest margin was seven basis points lower than for the same period last year, and three basis points lower than for the 2017/18 full year. It said this was in line with its expectations, as the group continues to see borrowers switching onto lower priced products in a “highly competitive market”.

Asset quality remains “strong”, the mutual added, with an average loan to value (LTV) of loan stock for total residential lending of 56 per cent at the end of the period – consistent with that reported at the year end.

sreid@scotsman.com