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Santander reports £18.1bn in gross mortgage lending in H1

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  • 12/08/2022
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Santander’s gross mortgage lending came to £18.1bn in the first six months of the year, up from £16.3bn in the same period last year.

According to its half-year results, more than a third of new business, 34 per cent, was attributed to home movers and remortgagers, representing over £6bn each.

In comparison, home movers in the first half of last year made up 50 per cent of new business to around £8bn, and remortgagers accounted for 18 per cent of new business at £2.98bn.

Around 20 per cent of new business came from first-time buyers, equivalent to around £3.6bn. This is up from 19 per cent of new business last year and £3.1bn of gross lending.

The bank said that 12 per cent of gross lending, or around £2bn, came from buy-to-let loans. This is roughly in line with last year at 13 per cent and £2.2bn.

The average loan size for new business was £234,000, which is in line with the end of last year, and compared to £179m as the average loan size for overall mortgage stock.

Santander said that in addition to new business there were £11bn of remortgages in which existing customers with maturing products were moved onto new mortgages.  This is down from £14.2bn in the first half of last year.

The balance weighted average loan to value (LTV) was 68 per cent for new mortgage lending, up slightly from 66 per cent at the end of last year.

Santander added that the loan to income (LTI) multiple of mortgage lending, based on average earnings of new business, was 3.34x income. This is slightly down from 3.35x income in 2021.

The majority of mortgage stock, 86 per cent, is made up of fixed rates, with eight per cent coming from variable rates, four per cent from standard variable rate (SVR) and two per cent from the follow-on rate.

The lender said that it had continued to see customer refinance from variable rates and SVRs to fixed rates due to lower mortgage rates and the “competitive mortgage market”. It also noted that five-year fixed rates had grown in popularity.

Santander said its profit before tax rose 32 per cent year-on-year to £982m.

Santander sets aside £20m for mortgage defaults

The bank also adjusted its model for mortgage default probability after testing and monitoring had shown a risk of underestimation.

Consequently, the lender has set aside £20m for anticipated mortgage defaults. Santander did not set aside specific funds in 2021 or 2020.

It has also set aside £18m for mortgage affordability, which is the same set-aside as last year.

Outlook

Mike Regnier (pictured), Santander’s chief executive, said during these “uncertain economic times,” the bank’s priority “remains doing all we can to support our customers and people”.

He continued: “We know many of them are worried about the rising costs of living and doing business, so we have increased the support available through our digital channels on a range of key issues including energy costs, spending and budget planning.”

Regnier said that despite the “uncertain operating environment” the hard work of its teams had helped the bank deliver a “strong set of results”, including helping more than 18,000 people onto the first step of the housing ladder.

He continued: “Our ongoing transformation programme has realised £572m savings which has helped to mitigate the impact of rising inflation and allowed us to continue improving our customer experience whilst delivering on our strategic priorities of being a responsible and sustainable business.”

Regnier said expected net mortgage lending would be “broadly in line” with market growth for the year.

He added that the bank expected net interest income to be above 2021, and that inflation would affect operating expenses for the year, but that this could be offset by savings from its transformation programme.

Regnier said that the rising cost of living was impacting customers but it had not seen any “significant deterioration of credit quality to date”.

He added that the bank’s balance sheet resilience was underpinned by 85 per cent of customer loans consisting of retail mortgages, which have a weighted average loan to value (LTV) of 51 per cent and that it had a “relatively small unsecured lending and BTL portfolios”.

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