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Santander mortgage growth highest in a decade as margins suffer

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  • 29/01/2020
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Santander mortgage growth highest in a decade as margins suffer
Santander has achieved its highest net mortgage growth in 10 years, after the lender homed in on pricing and customer retention.

 

Home loans jumped by £7.4bn in 2019, to £165.4bn from £158bn in 2018, full-year results showed.

Gross mortgage lending came in at £31.3bn, up from £28.8bn in the previous year – £7bn of which came from first-time buyers, up from £4.8bn in 2018.

Around 60 per cent of mortgages retained were refinanced online, the lender reported.

Santander’s online banking customers with an existing mortgage can now request a switch to a new deal online in under 10 minutes.

And through Mortgage Engine, the bank launched a pilot to provide multi decision in principle technology for intermediaries.

 

Mortgage pricing hurts margins

However, Santander’s focus on competitive mortgage pricing took a toll on its bottom line in 2019.

The bank’s net interest margin (NIM), the difference between interest income and interest paid, dropped 16bps, down to 1.64 per cent.

At the same time, the lender also lost £3.9bn of typically lucrative Standard Variable Rate business.

Overall profit before tax came in at £981m, down 37 per cent year on year.

The lender said it is delivering on a £400m transformation programme, including restructuring its branch network, to improve future returns.

 

Focus on retention and first-time buyers in 2020

This year, Santander expects mortgage lending growth of around three per cent, as borrower demand and house price growth is lower than long-term levels.

The bank said its focus will remain on quality customer service, retention and a proposition for first-time buyers.

Nathan Bostock, Santander chief executive, said: “Our 2019 results were impacted by the ongoing competitive income pressure on mortgages and PPI charges, but they also include the investment we are making as part of our plan to transform the bank for the future.

“We have continued to support our customers and I am pleased that we delivered our strongest net mortgage growth in a decade, reinforcing our position as the UK’s third largest mortgage lender.”

He also warned “the environment for the banking sector remains challenging, with ongoing competitive pressures and a demanding regulatory agenda”.

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