According to the trading update, The Co-operative said its mortgage balances have stayed stable in Q1 this year, with a mortgage pipeline of £900m.
This compares to a pipeline in the same period of last year of £2bn. At its 2021 half-year results, it had £1.5bn in its pipeline and it did not disclose a figure at the end of Q3 and year-end.
An investor relations spokesperson at the firm said there was a bias towards five-year fixed rates versus two-year fixed rates and most of the pipeline was post-offer. They added that it was a “more normalised” pipeline compared to the pandemic period.
According to its Q1 trading update, The Co-operative reported net mortgage growth and noted that it had “actively reduced new business volumes” to preserve bank margins.
The spokesperson said the bank had chosen to “generate more modest application and retention demand through lower pricing than more competitive peers”, adding that pricing pressure at lower loan to value (LTV) segments had been “more acute”.
This compares to net mortgage growth in Q4 came to £223m and in Q3 it was £405m.
Net residential lending came to £1bn in the same period last year, £1.8bn at the half-year results, £2.2bn in Q3 and £2.4bn at year-end 2021.
In its annual report for 2021, the group said its strategy was to “focus on growth in new mortgage business volumes principally through mortgage intermediaries”.
However, it said at the time that it was “heavily reliant on interest income” from its mortgage portfolio so it was looking to diversify income streams and yield.
The lender reported a profit before tax of £30.5m, which is up from around £7.2m in the same period last year. It added that this marked its fifth consecutive quarterly profit.
The average mortgage LTV for its portfolio was pegged at 55.9 per cent, which compares to 56.2 per cent in Q1 last year.
Core mortgage accounts with over three months of arrears came to 0.14 per cent in Q1 2022, which compared to 0.19 per cent in the same period last year.
Mortgage transformation programme progress ‘midway’
Operating expenditure rose by three per cent compared the same period last year to £84.7m, which it attributed to higher staff costs and performance related pay as well as £1.7m spend on its mortgage and savings simplification programme.
A spokesperson said that this was due to how it had been phased from a financial reporting perspective, and that any increases in salary were part of its normal annual salary review and changes. They added that full-year payments would be the same.
In its annual report last year, the bank said it had given notice to its current mortgage servicing operations provider and it would move operations in-house by December this year.
Nick Slape (pictured), chief executive of The Co-operative, said the group was currently “midway” through its transformation plan for its mortgage and savings platform, which would bring its mortgage servicing operations in-house.
He said: “These changes enable us to invest in simpler transactional journeys with an enhanced customer experience. The progress we have made along with the steps we are taking to improve recruitment and retention in light of the challenging environment give me the confidence that we will achieve the objectives set at the start of the year.”
