Full steam ahead at Nationwide as chief issues warning on housing market

Harriet Green
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Nationwide's head office in Swindon (Source: Nationwide)

Nationwide has reported its best ever annual results, but has warned that the housing market may well start seeing a “natural correction”.

“At some point buyers just start saying no”, said the mutual's chief executive, Graham Beale, to the BBC’s business editor Kamal Ahmed.

The prognosis came as Nationwide reported that it opened 430,000 new accounts in the last financial year - a 28 per cent rise - with pre-tax profits rising to £667m - a near-four-fold increase from the £168m a year before.

The lender’s market share increased to 6.2 per cent, up from 5.7 per cent. It has a target of 10 per cent. Beale has said the results are “proof that the mutual model can thrive”.

His words, of course, follow the crisis which has played out for the Co-op Bank, which revealed a £1.5bn black hole in its finances.

On housing, Beale stated that we’ve already seen a “slowing down in the market place”.

In the year, Nationwide upped its mortgage lending by 31 per cent to £28.1bn. It also approved 31 per cent of all mortgages under the government’s Help to Buy scheme.

But when it came to the number of mortgages it advanced to borrowers with a deposit of 10 per cent or less, accounting for first-time buyers, it said numbers remained low - 2.4 per cent of its total lending over the year.

Hit from government

Nationwide also emphasised that the government’s plan to issue bonds for pensioners through its National Savings and Investments could negatively impact its access to savings:

We believe that the changes to ISAs will result in more savings into cash ISAs, but that we may see some deposit outflows to NS&I if rates on the pension bonds are above the normal market range and we are therefore unable to compete.

Booming current accounts

The lender saw a new current account opened every 50 seconds during working days last year. Its been working hard to bag current account business as means of competing with larger rivals, driving growth away from its traditional savings model.

It says it’s been “one of the big winners” of the new seven-day switching process, which was introduced last September, with 10.8 per cent of all switchers moving to the society in March.

The mutual’s leverage ratio is now at 3.3 per cent - above the three per cent set by the Prudential Regulation Authority.

Beale commented on the outlook of the bank:

We will continue to provide our members with innovative and market leading products and services which together will reinforce Nationwide’s position as a clear and compelling alternative to the established banks.