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Santander predicts cost-of-living challenges ‘well into 2023’

Paloma Kubiak
Written By:
Paloma Kubiak
Posted:
Updated:
26/10/2022

Santander has warned of an uncertain outlook with higher mortgage rates and inflation providing challenges for customers “well into 2023”.

In its trading statement covering the nine months to September 2022, Santander said the outlook remains uncertain, with higher inflation leading to an increased cost of living and a drop in real disposable income this year.

“Mortgage interest rates have risen with the expectation of further increases to base rate and are likely to remain substantially higher than a year ago. These challenges for households and businesses are expected to continue well into 2023 and could impact credit impairments”, the statement read.

Santander reported gross mortgage lending in the nine months to October of £28.2bn in a strong market, up from £25.2bn in the same period last year. It added that it expects mortgage lending to be broadly in line with market growth this year.

While it had not seen a “material deterioration” in the mortgage book to date, against the backdrop of higher inflation, energy prices and increased interest rates, it said this could affect customers’ ability to make repayments.

As such, the lender has braced for an impact on loan defaults by bumping up provisions. It has set aside £256m in credit impairment charges, up from £170m at the same point last year. Off the back of higher impairment charges, adjusted profit before tax fell 3% to £1.64bn from £1.7bn in 2021.

Santander also revealed it has proactively contacted more than 1.6 million customers deemed to be the most impacted by the cost-of-living crisis to highlight the support it offers.

‘Challenging environment’

Mike Regnier, UK chief executive, said: “Many of our customers remain worried about the impact of the cost of living, and they are looking to us to help them navigate this challenging environment.

“As one of the UK’s leading mortgage providers, we particularly understand the concerns of existing mortgage customers, first time buyers and especially those whose fixed rate mortgage is about to come to an end.

“So we are providing advice and guidance on how households can manage their mortgage, such as exploring options around length of term.

“We are also continuing our programme of proactively contacting customers who are struggling, to offer help with managing their finances and energy costs.

“In this environment, we have maintained a focus on how we can deliver more for our customers with products that deliver real value.”

He added: “These are a set of results reflecting the hard work of our people, but they also demonstrate the continued importance of taking a prudent approach to risk and maintaining a resilient balance sheet.

“While we have seen no material deterioration in our mortgage book to date, we have increased our provisions. Looking ahead it is clear that the ongoing inflationary pressures, increased energy prices and impact on economic activity will mean the service and support we provide our customers and businesses will continue to be critical.”


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