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Building societies blame competitive market for gross mortgage lending falls

  • 27/02/2019
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Building societies blame competitive market for gross mortgage lending falls
Gross mortgage lending reductions at Skipton Building Society, Leeds Building Society and Newcastle Building Society have been confirmed, with the strong level of competition in the market cited by all three as a contributing factor.


Gross mortgage lending dropped at Skipton Building Society, reaching £4.3bn in 2018 compared to £4.5bn in 2017.

The mutual put the fall down to the “intensity of competition within the mortgage market”, as well as more stringent affordability criteria Skipton introduced towards the end of 2017.

However, mortgage balances at the building society jumped sharply by £1.6bn to £18.2bn, a growth rate of 10 per cent. This included £139m which was the result of the merger with Holmesdale Building Society.

Skipton also saw an improvement on the number of mortgages in arrears. It confirmed that the number of residential deals in arrears by three months or more has fallen to 0.29 per cent from 0.36 per cent last year.

Overall, Skipton saw group profit before tax drop by 5.9 per cent year-on-year to £188.2m.

David Cutter, group chief executive at Skipton, noted the “good growth” in the society’s mortgage balance came alongside maintaining a strong capital base.

He continued: “The more competitive mortgage environment coincides with a continuous period of increased political uncertainty, as the UK is in the midst of withdrawing from the European Union.

“Should there be a no-deal Brexit there would be no immediate significant impact on the society but we would be cautious regarding the potential medium to longer term implications arising from possible movements in house prices, unemployment or bank base rates.”


Leeds Building Society

Leeds Building Society saw its gross mortgage lending fall too, from £4.1bn in 2017 to £3.8bn in 2018.

However, overall Leeds BS delivered net lending of £1bn, with it full mortgage book growing by 6 per cent to reach a total of £15.8bn.

The mutual pointed out that it had moved its focus beyond simply mainstream lending to include borrowers who are not so well served by the wider market, including shared ownership and interest only.

Profit before tax dropped from £120.9m to £116.9m, a result which it put primarily down to the one-off impact of the sale of its Irish mortgage book for £6.5m.

Richard Fearon, the new chief executive, noted that increased competition was likely to put further pressure on its margins this year, while the ongoing Brexit uncertainty will hit the housing market “in unpredictable ways”.

“We expect this, combined with the costs of our ongoing investment in member value and further developing our digital capability, to result in lower, though still robust, profitability in the near term.”


Newcastle Building Society

Newcastle Building Society also saw gross mortgage lending fall in 2018. In its annual results, the mutual revealed that its gross total dropped from £535m in 2017 to £520m.

Newcastle put this down to the combination of “weak growth” in the mortgage market generally, as well as strong competition, though it noted that despite this the number of mortgage deals completed with self-employed borrowers had doubled.

Arrears levels also fell, from 0.34% to 0.30%, while the mutual added that repossessions continued to be at “very low levels”.

The mutual’s profit before tax grew from £13.1m last year to £13.3m in 2018.

Andrew Haigh, chief executive at Newcastle BS, added that while the year ahead will bring “many unique challenges”, the society was well placed to continue supporting homebuyers.


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