Nationwide’s 48pc rise in mortgage advances

The mutual achieved growth across all of its product lines, including a 48 per cent increase in mortgage advances to £8.9bn, as underlying profits rose to £172m in the six months to September 30. Chief executive Graham Beale added that the group’s balance sheet was amongst the strongest in the industry, with a capital ratio of 12.7 per cent.

However, he warned that Europe’s debt crisis was forcing up the cost of industry funding and fuelling greater competition for savings deposits at a time when the market is growing slowly.

Mr Beale continues to expect the UK recovery to be maintained – at a modest pace – but said a return to recession in 2012 cannot be ruled out.

He added: “The outlook for the UK economy has weakened over the last six months and prospects for the remainder of 2011/12 and 2012/13 are very challen- ging.”

Nationwide’s funding requirements were met with a 250 per cent increase in the level of savings to £1.4bn in the half year, making it the second largest savings provider in the UK. As a “challenger” to the established banks, Nationwide reported a 24 per cent rise in the combined sales of its current accounts, credit cards and personal loans.

And with Bank of England interest rates still at a record low of 0.5 per cent, customers who remained on the group’s base mortgage rate (BMR) cost Nationwide around £350m in the six months.

The benefit, which equates to more than £1,000 for each account per year, stems from the society’s pledge that its BMR would never be more than 2 per cent above the Bank of England base rate.

The group has swallowed up a number of smaller rivals since the onset of the financial crisis, merging with the Derbyshire and Cheshire building societies and taking over ailing Dunfermline’s savings assets.