Yahoo Finance Nationwide profits rise on high demand for UK buy-to-let mortgages
Nationwide saw its profits jump 17% in the six months to October, boosted by strong demand for buy-to-let mortgages.
The building society posted profits of £361m ($478m) in its first-half financial report on Friday, though its underlying income was virtually unchanged at around £1.5bn.
Strong landlord demand, and a wider UK property boom amid high pent-up demand and stamp duty cuts in part of the country, failed to lift total mortgage lending year-on-year, however.
The gross value of total mortgage lending came in at £12.7bn, down 12.3% on the previous year, likely reflecting the property market shutdown for part of the year. It also comes in spite of Nationwide retaining 90% loan-to-value mortgages for longer than some of its rivals.
Nationwide said 246,000 mortgage payment holidays had been granted in line with government rules, aimed at helping struggling homeowners through the coronavirus crisis.
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The group said it had pledged that no borrower would lose their home if they worked with the lender to get their finances “back on track.”
The number of members in arrears has stayed flat, but the building society warned: “This may change when job support schemes are withdrawn.” It set aside £139m for loans that may not be repaid, up from £57m a year earlier.
It also said it was encouraging buy-to-let customers to pass on payment breaks to tenants, and temporarily waived fees on limited access savings accounts.
Meanwhile building society said the crisis had curbed banking customers’ desire to open new current accounts or switch, with switcher numbers to Nationwide falling.
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“Having reached our goal of achieving a 10% share of current accounts last year, we decided to pause our switching incentives and focus firmly on supporting our existing members during the pandemic, over actively seeking new ones,” said the group.
Chief executive Joe Garner said defended its decision to slash interest rates on its savings accounts after the Bank of England’s rate cuts, saying significantly higher rates “would not be financially sustainable.”
He added: “It is very hard to predict what will happen to the economy, jobs and the housing market in the near future as a result of the pandemic and Brexit.
“While there are many uncertainties ahead, Nationwide faces into them from a position of considerable strength. We have steady profits, stable income, a strong balance sheet, and a strong capital position.”
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