Virgin Money takes hit to mortgage lending as stamp duty relief ends
VIRGIN MONEY has revealed a hit to mortgage lending since the end of stamp duty tax relief and as it battles amid stiff competition in the market.
The group – formerly known as CYBG – reported a 0.5 per cent fall in mortgage lending to £57.8bn in its first quarter to December 31.
It blamed the end of the stamp duty land tax relief, which came to a close after tapering to the end of September, as well as ongoing competition in the mortgage sector.
Virgin Money also said business lending dropped 2.2 per cent to £8.3bn in the quarter as demand remained “subdued” and as the Government’s Covid-19 support schemes began to wind down.
But the group upped the full-year outlook for its net interest margin – a key measure of profitability for retail banks – and cheered a more buoyant outlook for the wider UK economy.
It said: “Despite the uncertainty posed by new variants and concerns over inflation, the strengthening backdrop and easing of Government restrictions give some scope for greater optimism about the pace of the recovery.”
Virgin Money’s mortgage lending decline comes after UK banks have enjoyed booming home loan business during the Covid crisis, with tax breaks, rock bottom interest rates and changing buyer demand amid the pandemic spurring the market on. But interest rates are now rising as the Bank of England looks to rein in surging inflation, having already been increased to 0.25 per cent last month and the first of more expected later this week.
This will help boost retail bank profit margins, but may further dampen mortgages demand. David Duffy, chief executive of Virgin Money, highlighted a “strong” first quarter despite the drop in mortgages.
He added: “Our balance sheet is performing well, asset quality remains robust and we have increased guidance on net interest margin for 2022.”
We have increased guidance on net interest margin for 2022. David Duffy, chief executive of Virgin Money