‘The housing market is well off the boil’: Nationwide sees cooling property demand as mortgage lending slumps


  • Gross mortgage lending falls by nearly £1bn at Nationwide
  • Building society notes slowdown in both demand and house price growth
  • BBA reveals approvals are down 16% compared to last year
  • Nationwide pre-tax profits rise 113% to £598million
  • New current account opened every 50 seconds 

Further signs of a cooling housing market emerged today with two separate reports showing a slump in mortgage lending.

Nationwide said gross mortgage lending had fallen by £900million as Britain’s biggest building society released its latest set of financial results.

It lent £13.1billion in the six months to 30 September 2014, down from £14billion in the period before and it now accounts for 12.2 per cent of the mortgage market, compared to 15.4 per cent previously. Net lending was also £2billion lower at £3.6billion.

Despite that Nationwide also revealed pre-tax profits more than doubling to nearly £600million for the six months to September compared to last year – and said it was opening a new current account every 50 seconds.

Mortgage slowdown: Nationwide Building Society has seen mortgage lending drop by £900m compared to previous six month period

In the results statement, it said: ‘During September, activity in the housing market has moderated, with a slowdown in demand and house price growth.

‘However, with continuing low interest rates and a strong labour market, underlying demand is expected to remain robust.’ 

At the same time, the British Bankers’ Association said mortgage approvals for house purchases fell for a fourth month in a row to a 17-month low of 37,076 in October.

Richard Woolhouse, chief economist at the BBA, said: ‘Today’s figures suggest that the cooling of the property market has continued in recent weeks. Approvals were 16 per cent lower in October than in the same month last year – the corresponding figure for September was a 10 per cent decline.

‘Despite a softening in the housing market, consumers continue to show confidence in the economy with unsecured borrowing at its highest growth rate in years.’

The BBA statistics also show remortgaging levels are down 21 per cent compared to the same month last year while equity withdrawals have lowered by more than a third.

Howard Archer, chief economist at IHS Global Insight, said: ‘The BBA data add to now pretty widespread and compelling evidence that the housing market has come well off the boil.

‘While the falling back of mortgage approvals from January’s peak level was clearly influenced appreciably by the introduction of the new Mortgage Market Review regulations that came into effect in late April.

‘However, the fact that mortgage approvals are substantially below their January peak levels – and are currently falling – after lenders have now likely got to grips with the new mortgage regulations points to an underlying moderation in housing market activity.’

In the most recent Nationwide house price index, issued last month, it showed growth had slowed, but prices are still nine per cent higher than last year.

Boom time: Nationwide has seen its profits leap as it claims a bigger market share and increased the money it makes on savings and loans, as measured by the net interest margin.

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Boom time: Nationwide has seen its profits leap as it claims a bigger market share and increased the money it makes on savings and loans, as measured by the net interest margin.

Nationwide’s doubles profits

Nationwide revealed statutory pre-tax profits rose 113 per cent to £598million for the six months to September, compared to the same period last year.

It recorded a big jump in the money it makes on savings and loans, with its net interest margin rising from 1.13 per cent to 1.48 per cent.

The building society made £1.42billion from its net interest income, up £336million on the same period last year. This means it racked up a 31 per cent rise in profits from the gap between savings and loan rates.

The growing margin continued a significant trend over the past two years, which Nationwide said was driven by a lack of competition in the savings market pushing rates down and falling money market interest rates.

This has spelt lower mortgage rates for homeowners but slashed returns for savers across the market.

Cashing in: Nationwide chief executive Graham Beale has delivered a big jump in profits

Cashing in: Nationwide chief executive Graham Beale has delivered a big jump in profits

The building society says it is opening a new current account every 50 seconds and its current account market share has increased to 6.6 per cent.

Savers poured a further £3.5billion into accounts to deliver a combined savings and current account balance market share of 13.8 per cent.

Nationwide reported that it had claimed a 20.7 per cent market share of the rise in cash Isa balances, a rise largely driven by the new higher allowance of £15,000 announced in the Budget.

It said it continued to strengthen its official financial measures, with a Common Equity Tier 1 ratio now standing at 17.6 per cent, up from 14.5 per cent in April this year, and a leverage ratio increasing to 3.8 per cent from 3.4 per cent in April.

The building society said it has helped 23,800 first-time buyers get onto the property ladder in the six months to September end, while it does not expect interest rates to rise before April.

Nationwide currently holds 11.9 per cent of the mortgage market. In the six-months covered by the results Nationwide accounted for 12.2 per cent of all gross mortgage lending and 24.8% of all net lending (which strips out balances repaid to measure new money lent). 

Graham Beale, chief executive of Nationwide , said: ‘The first six months of this financial year reflect the growing strength of the Society and our ability to deliver better service than our banking peers. 

‘Consistent with our mutual heritage, we offer an attractive range of products designed to be transparent, fair and good value. This is reinforced by a culture which is focused entirely on the needs of our membership and is in contrast to the traditional shareholder model of the banks.’

‘We have developed new products, invested in technologies which give our members greater choice in the way they manage their financial affairs, and have rewarded loyal members with some market-leading product offers. Alongside this, we have delivered a strong financial performance and improved our capital position. As a result, our Common Equity Tier 1 ratio is the highest in our peer group, which underlines our position as a safe and secure financial services provider for our members.’

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