The bank’s annual report revealed lending £14.6bn to the UK residential mortgage market last year, compared to £23.7bn in 2011.A fifth of lending went to first-time buyers.
Lending criteria on high loan-to-value and interest-only product tightened – a 50% LTV cap was imposed on new interest-only mortgage and there was a £6.2bn reduction in total interest-only mortgages.
The report stated: “Further managed reductions in the mortgage stock and a lower market share are expected in the future, although this reduction is likely to be smaller than in 2012.
“We will continue to lend at favourable margins with a good risk profile.”
Prime UK residential mortgages make up 85% of Santander UK’s customer assets. However, the bank’s market share of gross mortgage lending dropped over the year from 18.4% at the end of 2011 to 8.5% at the end of 2012.
The proportion of new business originating through the branch and telephone channels grew over the year as Santander focused on existing customers with good risk profiles.
While the bank’s profits after tax rose by 4% in 2012 to £939m, its net interest income fell on the previous year, the report showed.
It said: “The impact of structural market conditions and the increased cost of retail deposits have been in part mitigated by higher new lending margins on mortgages and SME loans and increased standard variable rate (‘SVR’) mortgage balances.
“Net interest income is expected to stabilise in 2013 as conditions improve, particularly in the second half of the year.”
