What has caused such a significant reduction?
Santander UK has reported a reduction of £10.1 billion in mortgage lending in the first nine months of the year due to high mortgage rates.
While other figures in the high street lender’s latest quarterly management statement indicate positive growth, the housing market slowdown has had an obvious effect on Santander’s mortgage lending business.
Pre-tax profit was up by 16% to £1.73 billion, while net interest income also increased by 8%, largely due to the impact of higher base rates, partially offset by a reduction in lending margins. Credit impairment charges were down by 20% to £204 million, reflecting better macroeconomic scenarios from September 2022.
We issued our Q3 2023 results this morning. Take a look at some of our key highlights below. #SantanderUKResults pic.twitter.com/BBZWswcsd0
— Santander UK (@santanderuk) October 25, 2023
“We have delivered a good set of results in spite of a challenging macroeconomic environment,” Mike Regnier (pictured), chief executive officer at Santander UK, commented. “We have prioritised our customers’ needs, offering the right products and services, as well as support with their finances when they need it.
“We provided competitive rates for savers, including a top-of-market easy access savings account, and helped homeowners struggling with rising rates, through the government’s Mortgage Charter.”
However, with a slower housing market and higher mortgage rates, Santander’s applications fell in the year to September 30.
“Our decision to optimise the balance sheet given higher funding costs has contributed to a reduction of £10.1 billion in mortgage lending,” the bank stated in its Q3 quarterly management statement.
Stephen Perkins, managing director at Yellow Brick Mortgages, said these results from Santander will be similar across all the major lenders who are all far below their lending targets.
“This has been the main catalyst behind the mortgage rate war during the third quarter and October to date, as lenders have been scrapping over the remaining crumbs of new lending opportunities,” Perkins pointed out.
“It has also led to a focus on existing borrower retention. Rates are unlikely to reduce significantly in the next 12 months, so lenders are setting expectations that their lending volumes will remain reduced for the foreseeable, also with lower margins as they compete for business.”
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