Virgin Money sees mortgage lending fall and credit card arrears rise

It said that, while overall borrower arrears remain “modest”, it continues to see a “gradual increase in credit card arrears”.

Overall unsecured lending grew 2.4 per cent in the third quarter, mainly driven by credit card growth.

Virgin Money’s third-quarter figures showed a 0.4 per cent fall in mortgage lending to £57.5bn in the three months to June 30 in what it said was a “subdued” market with borrowers facing soaring costs of fixed-rate deals after a flurry of interest rate rises.

Mortgage costs recently surged to highs not seen for 15 years as interest rates have risen to 5 per cent in the battle to control inflation, but have eased back a little after recent data revealed a sharp slowdown in the pace of price rises.

Virgin Money said it is ramping up its restructuring activity, having last month said it plans to shut almost a third of its bank branches due to the shift towards online banking.

It is axing another 39 branches, which will leave it with 91 across the UK, in a move that is putting 255 jobs at risk.

In its latest update, Virgin Money said customer deposits grew 5 per cent to £67.3bn amid a trend for households to deposit more cash into bank accounts as savings rates have increased.

The lender also said borrowers are opting for shorter fixed-rate mortgage deals due to the current high mortgage costs, while it added that overall spending has remained strong.

It is seeing customers prioritise spending on holidays and eating out and “things they can enjoy” rather than goods during cost-of-living pressures.

Virgin Money also launched a £50m share buyback to return cash to investors and said it expects about £175m in total under the programme in 2022-23, with “more to follow” by the end of next year.

David Duffy, the chief executive, said: “We have delivered another quarter of good progress against our strategy, with growth in both deposits and our target lending segments.

"Given our strong capital position, we anticipate a total of c.£175m of buybacks for FY23 (full year 2023) with more to follow as we normalise our surplus capital position by the end of next year.

“Our overall credit quality remains stable and we are fully committed to doing the right thing by our customers, through competitive rates, innovative products and proactive communication, as well as supporting Government initiatives to help people through the current challenging environment.”

In a statement, Virgin Money said: “The group is providing support for customers dealing with rising living costs, including the Mortgage Charter package of measures agreed with HM Treasury and other tailored solutions.” ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​