According to its full-year results, the fall in lending was due to demand for new lending decreasing slightly due to the “higher rate environment, stressed affordability pressure and wider cost of living considerations”.
The company said mortgage balances had decreased by 1.1 per cent year-on-year to £57.5bn which reflected “slower market activity and demand”.
Virgin Money said it aimed to maintain its market share at around 3.5 per cent.
The firm reported an underlying profit before impairments of £903m, which is up nine per cent on 2022.
Growth in trackers
Virgin Money said during the year there had been a “shift and increase” in the number of customers opting for tracker mortgages so they can “monitor the interest rate movements”.
Looking at its mortgage portfolio, around 91.5 per cent of its mortgages are on a fixed rate, in line with 91.3 per cent last year.
Those on a variable rate rose from 3.6 per cent in 2022 to 5.3 per cent in 2023, whilst those on a standard variable rate (SVR) fell from 5.1 per cent last year to 3.2 per cent this year.
Virgin Money attributed the fall in customers on the SVR to the “increase in interest rates”.
Forbearance comes to £498m
The lender said its forbearance totalled £498m, or around 3,801 loans, which is a fall from £640m or 4,636 loans in the same period last year.
Virgin Money said the fall was primarily driven by “customers successfully completing the forbearance reporting probation period and returning to fully performing status”.
During the period the lender made 55 repossessions of which four were voluntary. This is down from 73 in 2022, within which seven were voluntary.
Mortgage platform upgrade expected to have ‘significant deferral and redesign’
Virgin Money confirmed a write-off charge of £45m during the year as part of its “mortgage digitisation programme”. This is an increase from £28m last year.
The lender said that following an assessment of progress to upgrade its mortgage platform and challenges identified during testing, it anticipated a “significant deferral and redesign as we implement the upgraded capability”.
“We remain committed to launching improved capability for our mortgage customers and brokers over time, and there remains no impact on day-to-day trading,” the report said.
David Duffy (pictured), Virgin Money’s chief executive, said: “We made good progress executing our strategy in 2023, growing both our relationship customer base and target lending segments.
“With the momentum we carry into 2024, we are confident in the outlook for our business and we expect to deliver around £800m in distributions to our investors by the end of the three-year period ending in 2024.
“Under the Virgin brand, our ambition is to create the UK’s best digital bank. To help achieve this goal, we are stepping up investment in our technological capability to future proof our business and protect our customers from the growing risk of fraud strategies driven by advances in AI.”
