In its annual results, the mutual said its market share of gross mortgage lending decreased from 11.8 per cent to 10.8 per cent year-on-year, which it attributed to the “highly competitive market”.
Its net mortgage lending came to £3.3bn, less than half the £7.1bn it posted the previous year, while its market share of mortgage balances contracted from 12.4 per cent to 12.2 per cent.
Nationwide said the economic outlook was still uncertain, primarily because of increases in the cost of living and higher interest rates. The mutual said this led to a drop in mortgage market activity and house prices which it expects to remain subdued in the second half of 2023.
The average loan to value (LTV) of new residential lending came to 69 per cent, fairly flat on the previous year’s 70 per cent.
Nationwide made a credit impairment charge of £126m, which was significantly higher than the release of £27m it made during the prior year. It said this reflected the deterioration in the economic outlook, and the impact of higher expected interest rates on mortgage provisions.
The mutual said it expected arrears to rise but noted that the credit quality of its lending portfolio was “strong with low current levels of arrears”.
The share of mortgages in arrears of three months or more fell from 0.34 per cent of its book to 0.32 per cent.
Nationwide said its borrowers were “relatively well placed to withstand challenges in the medium term”, as a high proportion are on fixed rates.
However, it said the move to higher interest payments was a “challenge” and the mutual plans to support its borrowers.
Strongest financial performance
Nationwide said the year was its “strongest on record” as its underlying profit rose from £1.6bn to £2.2bn, while its statutory profit rose from £1.5bn to £2.2bn.
It said this was driven by income growth, boosted by higher interest rates. Its total underlying income came to £4.6bn, up from £3.8bn.
Nationwide’s net interest margin improved from 1.26 per cent to 1.57 per cent.
Debbie Crosbie (pictured), chief executive of Nationwide Building Society, said: “We have delivered a strong financial performance by providing banking that is fairer, more rewarding and for the good of society.
“Our strongest financial performance means that we are able to launch the Nationwide Fairer Share Payment, as well as the Nationwide Fairer Share Bond – with a highly competitive interest rate on savings for our existing members. We can do this because we’re a building society, not a bank, and our profit is reinvested for our members’ benefit.”
The mutual’s Fairer Share Payment will see select account holders receive a £100 payment in June.