However, the building society said its lending activity was upheld by strong business through its buy-to-let arm, The Mortgage Works which remained open throughout the year.
Its specialist gross mortgage lending, predominantly made up of buy-to-let business, increased by £1.6bn to £39.3bn compared to the previous six months.
The balances of its prime mortgages rose to £151.4bn from £151.1bn.
Nationwide said its overall lending recovered once the property market reopened and changes to stamp duty.
The majority of the mortgages on its books were also low risk, with 94 per cent of its loans having an average loan to value (LTV) of 56 per cent.
The mutual’s market share remained flat at 12 per cent, a negligible drop from 12.3 per cent last year.
Stable net interest
Nationwide’s net income margin increased to 1.15 per cent from 1.12 per cent last year.
Due to an improvement in mortgage margins which the mutual said had been declining for four years, Nationwide managed to increase its net interest income by £63m to £1.45bn.
Overall, its underlying profit before tax took a slight hit, falling to £305m from £307m.
Economic outlook
Its total impairment charge for the period rose to £139m, up from £57m last year, which Nationwide said was due to the “deterioration in economic outlook” and expected credit losses.
The mutual described four possible scenarios dependent on the outcome of the Covid-19 pandemic and Brexit and these were adjusted to reflect the severe falls in GDP seen in the first half of the year.
Its neutral scenario predicted a slight recovery in GDP amidst an unemployment rate of 8.9 per cent and a 10 per cent drop in house prices. The upside outcome forecast a five year per increase in house prices, while the severe scenario predicted an 11 per cent decline in prices.
Chris Rhodes, chief financial officer of Nationwide Building Society, said: “We always take a conservative approach to managing our business and you can see this clearly in today’s results.
“Whilst the society’s performance has clearly been impacted by the pandemic, it is pleasing to see the benefits of our conservative approach feed through into the results for the half year.”
He added: “Our margin has stabilised, costs have reduced and profit is stable compared to the same period last year, despite a rise in impairment charges associated with the pandemic and the current uncertain economic outlook.”
