New mortgage lending in Q2 2021 was slightly higher than last year, at £664m compared to £658 in 2022.
Some 62 per cent of its new mortgage business was on a five-year fixed rate while 31 per cent was on a two-year fix. A tenth of its new borrowers went for a three-year fixed rate mortgage.
The average loan to value (LTV) of its mortgage portfolio was 55 per cent, up from 53 per cent at the end of December.
The level of arrears across its book was 0.02 per cent higher compared to the year ending 2022 at 0.15 per cent as of 30 June 2023, compared to 0.13 per cent at 31 December. The bank said it was seeing some “small increases” in arrears as household finances were squeezed by inflation and higher rates.
Using its borrower’s stated income and expenditure, The Co-op estimated that they had £1,495 disposable income on average each month while 90 per cent at least £250 left over.
It said with a rate shock applied to borrowers whose products mature in the next two years, their disposable income would fall to £1,163 a month if their fixed rate term ended this year and £1,188 if it ended next year.
The Co-op said around 2.7 per cent of borrowers would be left with a disposable income of at least negative £100 if a retention rate plus one per cent was applied.
The Co-op updated its affordability assessments to reflect the impact of the economic environment on household finances to identify which borrowers were at risk of being left with negative disposable income and in need of support.
It said 2.04 per cent of its Platform mortgage holders, or 1,901 people, were considered at risk in December last year and this had risen to 2,121 people in April, or 2.18 per cent of its portfolio.
The lender said this was expected considering the economic landscape and insisted it was committed to supporting borrowers and complying with the government’s Mortgage Charter.
It said the demand for forbearance was low, suggesting that its customers were “resilient”.
It also noted that in the last six months, it had noticed more of its borrowers reverting to the standard variable rate (SVR), with a tenth of its customers paying the reversion rate for around five months before refinancing.
Steady performance
The Co-op reported a profit before tax of £61.8m and underlying profit of £72.2m; in line with H1 22 when it saw a pre-tax profit of £61.9m.
Its net interest income rose from £208.2m to £245.1m annually, while its net interest margin (NIM) increased by 33 basis points (bps) from 1.51 per cent to 1.84 per cent. It said these reflected rises in the base rate.
Nick Slape, chief executive of The Co-op, said: “In the first half of 2023, we have delivered a strong financial performance with a statutory profit before tax of £61.8m and a statutory return on tangible equity of 13 per cent.
“We recognise the financial challenges that the current economic uncertainty and the cost of living crisis poses for a number of our customers and colleagues and we will continue to support them. We are proud to have signed up to the recent Mortgage Charter offering tailored help to those customers who need it.
“I would again like to thank our colleagues and customers for their continued support.”
