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Nationwide reports gross mortgage lending up 20% to £32.6bn

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  • 24/05/2016
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Nationwide reports gross mortgage lending up 20% to £32.6bn
Nationwide’s preliminary results confirmed underlying profits grew 9% at the mutual as it drove its gross mortgage lending up 20% year-on-year to £32.6bn.

This hands the building society a 13.7% market share confirming its position as the second biggest UK mortgage lender after Lloyds Banking Group, which lent £39bn to February, down £1bn on the previous year, which it blamed on a ‘highly competitive low-growth environment.’

The mutual also reported net lending up by 28% to £9.1bn up from £7.1bn the previous year.

The lender offered 57,200 first-time buyer mortgages in the year to April or one in six in the UK and is the second biggest buy-to-let lender under The Mortgage Works brand.

In a series of criteria changes this year, Nationwide is set to increase its maximum age at mortgage maturity from 75 to 85-years-old in July after Lloyds upped its maximum age to 80 from 75-years-old in May, with more on the way to support retired borrowers.

Nationwide has also launched back into the restricted resale market and offers porting online for existing customers through intermediaries. It also introduced a ‘genuine bargain price lending’ option for homeowners looking to sell their properties at less than the open market value, which brokers can place online through Nationwide’s intermediary channel.

The lender said it increased rental cover requirements ahead of the tax changes incoming in 2017 and has increased rental cover requirements to ‘ensure loans are affordable, and by reducing the maximum loan to value for new buy-to-let loans’.

Nationwide, like many other lenders, saw its buy-to-let lending spike to 22% of new business, up from 18% in 2015, as many investors sought to buy before the Stamp Duty surcharge on 1 April.

The Group has increased its minimum interest coverage ratio (ICR) from 125% to 145% with effect from 11 May 2016, and also lowered its maximum LTV for buy-to-let borrowing from 80% to 75%. The Group said it will continue to review its approach to underwriting as the PRA consultation concludes to ensure that asset quality is maintained and new regulations are met.

The PRA’s consultation paper out in March aimed to strengthen buy-to-let underwriting standards through tougher affordability checks and allowances for tax liabilities. Nationwide has warned that some of these changes will affect landlords and move many investors from a basic to a higher rate tax band or wipe out any profits from the investment.

Nationwide also noted the increased competition in both prime and buy-to-let mortgage markets, which saw new business gross margins fall by an average of 24bps over the financial year. Customers are increasingly switching to better rates, it noted, which the mutual said will probably continue into 2016 and 17.

The average loan-to-value (LTV) across the group is 55% against 56% in 2015, attributable to the increase in house prices over the year.

The Group said it has widened its offering of mortgages at 90 to 95% LTV, and revised its existing Save to Buy proposition to align with the government’s Help to Buy ISA to give first-time buyers a further contribution to a deposit.

Arrears have continued to fall across both prime and specialist lending with the proportion of loans that are more than three months in arrears falling from 0.49% to 0.45%.

More broadly, the results confirmed it expanded its current account base with 525,000 new account opens and added £6.3bn to deposit balances.

Nationwide’s new CEO Joe Garner, who replaced Graham Beale last year, said: “More people are also choosing to manage their money with Nationwide, with over half a million new current accounts opened in the year. And our loyalty accounts and regular savings offering has led to an increase in member deposit balances of £6.3bn.

“It is my privilege to have been asked to lead an organisation which has consistently demonstrated that it is possible to be successful by doing the right thing. Our mutual status creates an ownership model that allows us to take a long-term view and make decisions in the best interests of our members. This, and our talented people, is Nationwide’s strength and our opportunity.”

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