by Mark Johnston
The United Kingdom’s second largest mortgage provider, Nationwide is cautiously looking into the future of the UK market. A recent report published by the Nationwide has show a rise in their profits but they are still concerned about what will happen in the wider property market.
The rise in profits is good news for the Nationwide amid turbulent times in the UK housing market as things have gone from bad to worse in the second half of this year. The increase in profits has been attributed to the building society tightening their lending criteria which in turn has lead to a reduction in losses relating to bad debt.
Their profits have increased from £143 million in the second half of 2009 to £259 million this year which equates to more than an 80% increase. As with many lenders, Nationwide were struck with a high level of losses as borrowers struggled to pay their loans following the financial crisis. Luckily, the Nationwide have managed to reduce this by around 45% together with a reduction in the losses incurred on their commercial property portfolio.
The concern now though is that bad debt may increase dramatically if interest rates increase. Many borrowers are only managing to stay afloat financially because their monthly mortgage payments are so low due to the historically low interest rates. Many of them have chosen to remain on their lenders standard variable rate (SVR) as it’s the cheapest option. Nationwide seem to be especially open to this issue as they have one of the lowest standard variable rates on the market as just 2.5%. As with other lenders, they set their standard variable rate at 2% above base well before the financial crisis that saw base rates plummet.
Graham Beale, Nationwide chief executive recently said: “The UK economy has continued to recover over the first half of the year, but still faces considerable challenges in the years ahead. n the housing market, conditions have weakened noticeably over the last six months, with both a decline in buyer demand and a modest downward trend in house prices.
He went on to say: “However, we believe that large house price falls of the magnitude seen in 2008 are unlikely given that interest rates will remain low and limit the level of mortgage arrears and distressed sales,”
Even with improved profits, Nationwide are predicting rocky times ahead due to a weak housing market but hope that house prices wont fall too much because of the low interest rates.
Nationwide have a range of competitive mortgages which cater for most peoples requirements. They also offer a range of special offers which include free standard legal and valuation fees. For existing customers Nationwide are also offering £300 cash back when they home or switch to a new mortgage once their current deal has ended.
First time buyers are also catered for with mortgage products that only require between a 10-15% deposit. They also have a great flexible five year tracker mortgage that allows unlimited overpayments and once a reserve has been built up they give their customers the ability to then make underpayments.
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