Nationwide sees 46% profit plunge due to BMR promise to borrowers
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GRAHAM BEALE LOW BMR HAS COST US £450M
Nationwide Building Society has seen its profits fall 46% partly due to its low base mortgage rate of 2.5%.
The UK’s largest building society has reported profits before tax of £212m for the year to April, down on last year’s £393m.
The society says its pledge to not increase its BMR to more than 2% above the Bank of England base rate has cost it more than £450m over the year.
In January Skipton Building Society increased its SVR to 4.95% after promising borrowers it would not go over 3% above the base rate.
Graham Beale, chief executive of Nationwide, says: “Over the year many of our mortgage borrowers have enjoyed a low BMR and others have benefited from our pledge not to enforce the contractual tracker floor rate.”
The society’s share of the mortgage market fell slightly to 8.7% from 9% in 2009. Group residential net lending was £3.6m, up from £1.6m in 2009, with gross prime lending for the year estimated at £10.3bn, down from £16.7bn in 2009.
Gross specialist lending was £1.7bn, down from £2.2bn in 2009.
Buy-to-let lending made up 66% of total specialist lending at the society, with some 24% being self-cert, 7% near-prime and 3% sub-prime. Sub-prime lending amounted to around £500m.
The society had residential mort-gage accounts more than three months in arrears of 0.68% compared with 0.64% in 2009 - less than a third of the Council of Mortgage Lenders industry average of 2.22%.
Beale has not ruled out branch closures as a result of the lower profits and has also called on the government to do more to promote the interests of mutuals.
He says: “I am encouraged to see that the coalition government intends to bring forward proposals to foster diversity, promote societies and create a more competitive banking industry.
“This is against a back-drop of public and political pressure on regulators to be seen to act decisively to prevent a repeat of the recent financial crisis. We support the objective of a secure and stable framework for banking regulation.”
But he adds that it is vital that this framework is developed with the mutual sector in mind.
He adds: “It must not undermine the competitive position of the sector and avoid unintended consequences that could arise from a ’one size fits all’ approach.”
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