The bank said the decision was made after “an assessment of customer indebtedness”.
Santander also made credit impairment charges of £321m, its results for the year ending December 2022 showed, driven by the “deterioration” in the economic environment. This was compared to a credit impairment writeback of £233m in 2021.
The bank listed higher interest rates, lower GDP, lower house prices and the risk of inflation impacting repayments as areas of concern.
Santander insisted that the number of loans entering arrears remained low. Within its mortgage stock, just 0.62 per cent of loans were more than 90 days past due at the end of 2022 compared to a share of 0.79 per cent in 2021.
The bank continued to support its customers with a “proactive outreach” to two million people who were most likely to be impacted by the rising cost of living.
Looking ahead, it said these challenges would continue throughout the year and could affect credit quality.
Gross mortgage lending uplift
Santander’s gross mortgage lending for the year came to £35.5bn, a rise on the previous year’s £33.6bn. Meanwhile, its net mortgage lending rose from £7.5bn to £9.8bn.
Some 85 per cent of its total customer lending was UK prime retail mortgages at an average loan to value (LTV) band of 50 per cent, down from 52 per cent last year. The average LTV for new mortgage business came to 69 per cent, up from 66 per cent in 2021.
The bank retained 81 per cent of borrowers whose mortgages matured in 2022, similar to the 83 per cent retention it saw in 2021.
Overall, customer loans rose by four per cent or £9.1bn to £219.7bn, which it attributed to “strong mortgage growth”.
Looking ahead, Santander said it expected mortgage lending growth to “slow sharply” as base rate increases dampen buyer demand.
It also predicted that house prices would drop back to levels seen in 2021. Santander said the outlook seemed uncertain with a possible recession ahead and inflation eating into people’s disposable income.
Profit rise
Santander’s profit before tax rose by two per cent to £1.89bn which it owed to increased income and lower costs, which were partially offset by the higher credit impairment charges.
Its underlying attributable profit of £255m in Q4 was down on the previous quarter’s £344m, which it said was affected by the anti-money laundering settlement reached with the Financial Conduct Authority (FCA) and the bank levy charge.
The bank’s net interest margin rose to 2.06 per cent, up from 1.92 per cent in 2021 because of the increased base rate. In Q4, its net interest margin was up five basis points to 2.12 per cent.
Its net interest income rose from £1.09bn to £1.12bn from Q3 to Q4, and annually this increased by 12 per cent to £4.5bn.
Mike Regnier, chief executive of Santander, said: “The global economic environment and rising cost of living have presented challenges for many of our customers and clients. Our focus has been to provide targeted and practical support, including advice on household budgeting and a toolkit for SMEs to help them through the ongoing inflationary pressures.”
Regnier said it continued to support the UK’s transition to net zero and provided more than £6bn in green finance over 2022.
He added: “The end of 2022 saw a marked slowdown in mortgage lending and, with an uncertain economic outlook for 2023, we will continue to focus on a prudent approach to risk while we help people and businesses prosper.”
