The figure is a steeper fall than the overall UK mortgage market which dropped by 10 per cent from £267bn to £241bn as the pandemic hit last year, according to the Bank of England.
The mutual’s profits before tax also suffered as it attempted to protect itself from any credit losses, plunging 86 per cent to £2m.
This was down to its credit provisions, which increased from £1.6m to £14.4m in response to the “exceptional deterioration” of the economy last year.
Its drop in profits also included a depreciation in the value of its former head office building at Portland House, which it exited following a transition to more flexible working practices.
Otherwise, its operating profit before impairment and provision costs were in line with 2019 with a marginal rise from £16.4m from £16.3m.
The proportion of mortgages in arrears by three months or more rose three basis points to 0.36 per cent but the mutual said this remained low for 2020.
Although its net interest margin dipped from 0.91 per cent to 0.81 per cent, it still saw a £3.3m increase in net interest income to £40.2m.
Andrew Haigh (pictured), chief executive of Newcastle Building Society, said: “Although Covid-19 has had a profound impact on the society’s operations during the year, our underlying business is still performing well, reflecting our resilient core.
“It is encouraging to be able to report that despite the property market having been effectively closed for a period and the need to absorb significant, non-recurring costs associated with Covid-19, the group’s operating profit before impairments and provisions for 2020 was £16.4m broadly in line with our performance in the previous year.”
“We remain strongly capitalised and continue to operate with appropriate levels of liquidity,” he added.