Nationwide blames profit plunge on low base rate

Nationwide: Society’s Base Mortgage Rate is guaranteed to be no more than 2% above Bank of England base rate

The UK’s largest building society Nationwide has reported underlying annual profits before tax of £212m, down on last year’s £393m.

The society has blamed low interest rates for the fall in profits for the year to April.

Its share of the mortgage market has also fallen slightly to 8.7% from 9% in 2009.

Nationwide’s Base Mortgage Rate is guaranteed to be no more than 2% above Bank of England base rate.

At 2.5%, the mutual estimates the cost of maintaining its BMR at this level relative to other rates charged in the market has been in excess of £450m in the past year.

Nationwide lent £12bn of mortgages last year and reduced the minimum deposit for house purchase from 15% to 10%.

It had residential mortgage 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%.

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.

“I’m encouraged to see that the government says it will bring forward proposals that foster diversity, promote mutuals and create a competitive banking industry.”

He adds: “This is against a backdrop 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 more secure and stable framework for banking regulation. “But it is vital that this framework is developed with the interests of the mutual sector in mind. Any rules must not undermine the competitive position of the society sector, and also avoid the unintended consequences that could arise from taking a ’one size fits all’ approach to regulation.”