NATIONWIDE said yesterday that its share of the mortgage market had reached a record high after seeing a big rise in the number of first-time buyers joining the property ladder.
The building society increased gross mortgage lending by 17 per cent to £21.5bn in the year to April 4, accounting for 15.1 per cent of all UK residential mortgage lending. Net lending more than doubled to £6.5bn.
During the year it provided loans to more than 42,000 first-time buyers, a 75 per cent rise on last year and meaning that the society was responsible for almost one in five of all first-time buyer mortgages in the UK.
Announcing annual results, Nationwide also said a record 123,000 customers switched their main banking relationship to the society, up 58 per cent on last year, during one of the most successful in its 26-year history of offering current accounts.
Nationwide said it opened 365,000 new current accounts during the period, meaning the society now has 5.2 million current account holders and its share of the main and package accounts market has risen from 5.1 per cent to 5.7 per cent.
Executive director Chris Rhodes said: “Dissatisfaction with the big banks is leading people to vote with their feet.
“We opened new current accounts at a rate of one thousand per day over the last year and many of these were people switching from another provider. These results show that Nationwide really is the main challenger to the big banks.”
The group’s underlying profit for the year rose by 56 per cent to £475m after an 18 per cent rise in total income to £2.52bn.
Chief executive Graham Beale said that Nationwide has focused in the past five years on ensuring that it builds and maintains “a sustainable business model”, with significant investment in infrastructure.
Mr Beale said: “Our financial position remains strong and robust. Our balance sheet is characterised by high quality assets, prudent levels of liquidity, a strong and diversified funding base and peer group lending capital ratios.”
While arrears rates for its retail customers were well below the industry average, the performance of its £20bn portfolio of commercial property assets has impacted on short-term profitability.
Nationwide blamed weak tenant demand and a resumption of declines in property values for an increase in the division’s bad debt provision charge in the year to £493m from £247m a year earlier.
Mr Beale said: “The weak economy has continued to undermine the performance of our commercial real estate portfolio, which has been impacted by weak tenant demand.
“Our strategy is to work with the borrowers over the medium term, to keep them in business and to protect the interests of our members.”
Nationwide added that the benefit of its pledge to maintain its base mortgage rate at two per cent above the Bank of England’s 0.5 per cent rate has benefited its membership by around £800m in the last year.
This equates to an average of more than £1,100 for each individual mortgage account compared to the rates charged by other lenders, which exceeded four per cent.
Commenting on the economic outlook, Mr Beale said: “We do not expect any significant change in the strength of the UK economy over the next twelve months, with continuing low interest rates required to support economic growth.
“This low rate environment combined with relative stability in unemployment will support mortgage affordability, but represents an unfavourable environment for savers. House prices have flatlined throughout 2012 and the first quarter of 2013, and this trend also looks set to continue with the broad balance between weak demand and constrained supply resulting in no strong price movements in either direction.
“Against this weak but stable backdrop the fundamentals of our performance during 2012/13 will continue in the coming year. We expect the strong margin recovery evident in our results to continue, albeit potentially at a slower pace, as the impact of mortgage repricing and balance growth is supported by low cost funding in both retail and wholesale markets.
“As a member owned institution we will seek to protect our loyal savers from low rates as much as possible, but recognise that we cannot defy market conditions.”
He added that the general economic outlook will continue to “hold back recovery in commercial real estate” for at least the next financial year, but he said Nationwide is confident its core business performance will allow it to comfortably absorb this impact.