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Lloyds predicts house price fall of 11 per cent as profits swell

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  • 25/10/2023
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Lloyds predicts house price fall of 11 per cent as profits swell
Lloyds expects house prices to fall five per cent this year, with a peak to trough fall close to 11 per cent overall, as its statutory profit after tax rose by nearly half to £4.3bn.

The bank said that this came after “strong house price growth” in 2022, and digging into its prediction the trough will occur in the second quarter of next year in its base case scenario. House prices will then start to recover from Q4 2024 onwards.

It added that the base rate forecast has peaked at 5.25 per cent and would start to fall from Q4 next year.

The lender expects inflation to fall more slowly, still standing at above five per cent in the last quarter of this year and then falling to close to four per cent by the end of next year.

It continued that peak unemployment has been revised down to 5.1 per cent and GDP was expected to strengthen by 0.4 per cent in 2023, compared to 0.2 per cent assumed in Q2.

 

Profits almost doubled

The lender reported a statutory profit after tax of £4.3bn, which is an increase from £2.9bn in the same period last year or equivalent to a 46 per cent increase.

Lloyds added that in the third quarter it made around £1.4bn statutory profit after tax, which is up from £494m in the same period last year.

The company’s open mortgage book was £298.3bn, which is in-line with the figure from last year at £298.4bn. It is also up from the half-year mark of £297.9bn.

The firm’s closed mortgage book stood at £8.1bn which is down from £12.3bn in the same period last year and down from £8.5bn in the prior quarter.

Lloyds said that balances in the third quarter had grown by around £1.4bn, with growth in the open mortgage book pegged at £400m during the period.

 

Struggling borrower figures

The group said that its new arrears figures have stayed stable this year with 0.27 per cent in the second quarter and then 0.26 per cent in the third quarter. Lloyds said that it was recording an impairment charge of £800m for the period.

It also noted that the new to arrears figures were below the 2019 average of 0.36 per cent.

Net interest margin, or the difference between lending and savings rates, came to 3.15 per cent, which is up from 2.84 per cent in the same period last year.

Lloyds group chief executive Charlie Nunn (pictured) said: “Guided by our purpose, we remain focused on supporting our customers and helping them navigate the uncertain economic environment.

“The group continues to perform well. Robust financial performance and strong capital generation in the first nine months of the year was driven by net income growth, cost discipline and resilient asset quality. This performance allows us to reaffirm our 2023 guidance.”

He added: “As we set out in the first of our four strategic seminars earlier this month, we are successfully executing against our strategic priorities. This supports progress towards our ambition to enable higher, more sustainable returns. Together, it will better position us to deliver for all of our stakeholders as we continue to help Britain prosper.”

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