A spokesperson for the bank said: “The mortgage market has slowed, and funding costs are significantly higher. In this environment, we reduced gross mortgage lending.”
Meanwhile, its update for the year said: “With a slower housing market and higher mortgage rates, applications fell in 2023.”
Santander reported that it also saw an £11.9bn decline in net mortgage lending, which it attributed to an optimisation of its balance sheet due to higher funding costs.
The bank said it would continue on this strategy in 2024, which would lead to “lower deposits and mortgage lending as we continue to prioritise profitability, capital generation and our core banking franchise”.
Its mortgage book amounted to £175.2bn in 2023, which was slightly down on the previous year’s figure of £187.1bn. Some £45bn of its portfolio accounted for new business and internal transfers.
This year, £39.3bn worth of mortgages on its book are due a refinance.
Purchasers top remortgagors among Santander borrowers
Homemovers made up 42 per cent of Santander’s portfolio last year, while remortgagors made up 28 per cent and first-time buyers accounted for 21 per cent of business.
It said buy-to-let activity remained a small portion of its book at nine per cent.
The average loan to value (LTV) of its existing borrowers was 51 per cent and new business was 66 per cent LTV.
Santander said arrears were still low across its borrower base, but noted a small rise across the portfolio. This represented a rise from 1.24 per cent at the end of 2022 to 1.49 per cent of its book by the end of 2023.
Of these, 0.8 per cent were in arrears of more than 90 days which was up from 0.62 per cent previously.
The bank’s net interest margin came to 2.2 per cent across 2023, up from 2.06 per cent the year before, which it owed to the higher base rate and “balance sheet management”. It said going forward, this was set to decline.
Profit on the up
Santander UK posted a profit before tax figure of £2.14bn, up from £1.89bn the year before marking a 13 per cent annual rise.
Its profit after tax was 12 per cent higher at £1.59bn.
Mike Regnier, chief executive of Santander UK, said: “Despite the difficult backdrop, our prudent approach to risk and the hard work of everyone at Santander UK has delivered a strong set of results for 2023
“As we look ahead to 2024, we expect interest rates and inflation to fall. We will continue to execute on strategic initiatives focused on building customer loyalty, creating value and simplifying our business. By working together with Banco Santander Group, we will harness the best of our local and global capabilities to develop new and innovative products and services for our customers and deliver the benefits of our scale.”
