In a trading update for the final three months of 2021, Virgin pointed out that its net interest margin had improved to 177bps, which it argued was despite the “ongoing strong competition in mortgages”, but cautioned that it now expects this to fall to 175bps for this financial year.
The lender noted that a fall in its lending activity was a reflection of lower demand generally in the market following the conclusion of the stamp duty holiday in September, as well as this heightened level of competition.
A spokesperson for the lender told Mortgage Solutions: “We have consistently said that our aim is to broadly maintain market share and optimise for value, rather than grow the book aggressively. We continue to be selective with our mortgage lending to ensure we are delivering returns rather than simply chase volume, which is reflected in the slight contraction in Q1.”
Virgin said it intends to continue investing in technology in order to expand its “digital straight-through processing capability” in order to maintain its mortgage market share over the medium term.
How other lenders have fared
The most recent results posted by the UK’s biggest lenders demonstrate just how impactful factors like the stamp duty holiday have been on their activity levels, but with the potential for those levels to drop off as the market normalises.
The last results published by Lloyds for example covers only the first nine months of 2021, and show that the size of its open mortgage book grew from £277.3bn to £292.6bn, a six per cent increase, while in the third quarter lending rose £2.7bn. Santander’s results cover the same period, with the lender reporting strong mortgage growth to reach £25.2bn in gross lending.
HSBC’s most recent results covered the third quarter of last year, with a £1.5bn increase in gross lending, while Nationwide’s latest figures cover the six months to the end of September, and show that its lending grew by £5.5bn over the period.
Barclays is another lender whose results only cover the first nine months of 2021, reporting £9.2bn of mortgage lending growth over the period, while Natwest noted an increase of £8.3bn in gross new lending.
However, activity levels in the mortgage market are expected to be notably down in 2022 compared to 2021. UK Finance for example has forecast gross lending for this year will reach £281bn, compared to its estimate of £316bn for last year.
