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Nationwide mortgage lending up 17% to £21.5bn

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The UK's biggest mutual Nationwide drove residential mortgage lending up 17% in the financial year to 2013, making it the most aggressive mortgage lender in growth terms this year.

The Swindon-based lender’s annual results out today gave it a 15.1% market share behind Lloyds Banking Group and relegating Barclays, another ambitious lender into third place.

The lender said much of its £21.5bn of lending was spurred on with a 75% increase in first-time buyer borrowers, with one in five of its loans going to first-time buyers last year.

In strong results, the mutual also announced net mortgage lending up 140% at £6.5bn, a 58% increase in current account openings with 365,000 new accounts and a rise in its Loyalty Saver account balances to £8bn.

Buy-to-let subsidiary, The Mortgage Works, lent £3.3bn of loans to 4 April 2013, down from £4.4bn in 2012. Nationwide said its drive to attract more experienced landlords reduced the proportion of first-time landlord applications from 23% to 10% by the end of the financial year.

Its buy-to-let market share is 19.5%, giving it a total specialist mortgage book of £25bn, up from £23.2bn in 2012. The average indexed LTV of residential mortgages at 4 April 2013 has remained broadly stable at 51%.

Overall, Nationwide’s Specialist residential mortgages came from £22.4bn of advances made through specialist lending brands, TMW and UCB Home Loans Corporation (UCB), and £2.6bn arising from the acquisitions of the Derbyshire, Cheshire and Dunfermline portfolios.

Up to 80% of the building society’s lending was buy to let, 13% was  self-certification mortgages, 5% relates to near prime and 2%, or £0.4bn, is sub prime.

The lender’s average LTV rose to 67% from 63% the previous year as a result of increased first-time buyer lending but including the back book rose from 50 to 51%.

The lender was forced to pay out £84m for the impact of the Financial Services Compensation Scheme and bank levy up from £75m last year, with 0.72% of accounts in arrears against the CML average of 1.89% 3+ months in arrears.

Nationwide’s CEO Graham Beale said the Funding for Lending Scheme supported lending margins, which “drove down the market price of both new
lending and funding since its introduction; this is beneficial to margins given the more rapid reprice profile of liabilities relative to assets,” he said.

“In addition, balance growth in both consumer banking and personal loans, and lower core liquidity holdings, have contributed to the improved margin performance,” he said.

The mutual tapped into £2.5bn of government funding by 4 April, producing a direct interest cost saving, relative to the Group’s average cost of funding, of approximately £14m or 0.7 basis points on net interest margin.

The group’s underlying profit was up over 56% at £475m and the society had a Core Tier 1 capital ratio of 12.3%.

Beale said: “Our results for the year demonstrate the strength of our core business franchise, including strong growth in mortgage volumes, a significant improvement in our net interest margin, a material reduction in our cost:income ratio and continued delivery against our strategy to grow our share of the personal banking market. These positive developments have combined to drive an 18% rise in total income to £2.52bn (2012: £2.14 billion).”


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