Gross lending was broadly flat in the 2017 calendar year to £25.5bn, slightly down from £25.8bn in 2016, as overall profits from Santander’s UK arm fell amid losses relating to the collapse of outsourcing firm Carillion.
However, the banks’s net mortgage lending increased £600m year-on-year to £154.9bn, as the business focussed on customer service, retention and pricing.
Transaction volumes through the Santander’s online mortgage retention tool “increased substantially” in 2017, with 47% of mortgages retained online – as around 78% of mortgages that reached the end of their incentive period stayed with the lender.
The results came as the bank’s digital customer base continued to surge, with an average of 1,400 new digital mobile users every day in the year ending December 2017.
Last summer, the lender launched a service that allowed customers to apply for their mortgage through a video link to an adviser.
Santander also revealed its proportion of Standard Variable Rate (SVR) balances fell to 15%, from 19% in 2016, including attrition of £5.5bn, driven by customer refinancing and sentiment over future interest rate movements.
Fixed-rate customers accounted for 66% of balances up from 59% a year earlier, while variable rate borrowers fell from 22% to 19%.
Earlier this month, Santander introduced a second lower SVR rate, which customers ending deals will now be shifted on to; critics said the move was likely aimed at retaining customers.
The profile of mortgage borrowers remained broadly unchanged year-on-year.
The bank lent to 24,000 first-time buyers in 2017, equating to £4bn of lending, while buy-to-let mortgage balances increased £200m to £6.8bn – focussed on non-professional landlords.
Home movers accounted for £68.9bn of lending and remortgages for £50.4bn, making up 44% and 33% of the total respectively.
Competitive mortgage market
The bank described the current environment as competitive and forecast its Net Interest Margin to fall in 2018, thanks to ongoing battles in new mortgage pricing, as well as SVR attrition.
The drive on retention and digital is to continue this year, with gross mortgage lending expected to be in line with the market, the bank said.
The lender said the credit quality of its loan book has performed well, supported by the resilient UK economy and risk management practices.
Nathan Bostock, Santander’s UK chief executive, said: “We have continued to improve our offering for customers, with products and services tailored to suit their needs and delivered in a way that works for them.
“In addition, we supported our corporate customers with increased lending to other business sectors except in commercial real estate where we managed our exposure.
“The prudent actions we have taken to protect Santander UK and our conservative risk management means we are well placed to deliver sustainable profitable growth and provide our customers with valuable services and financing.
“Despite the uncertain environment we are fulfilling our purpose to help people and businesses prosper and to support the wider economy.”