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| ::Nationwide gives gloomy forecast to match profit - 20th November 2009 |
| Nationwide Building Society has reported a big slump in profits and delivered a gloomy forecast for the UK economy and the housing market. Pre-tax profits for the six months to the end of September were £143m, down 62% on the £374m reported a year ago. The company blamed low interest rates and the "dramatic fall" in commercial property prices for the slump. It also said the recovery would be slow and rising unemployment would put downward pressure on house prices. "Looking ahead, we expect the remainder of this year and next to present a very difficult trading environment," Nationwide's chief executive Graham Beale said. He added that interest rates would probably remain at their record low of 0.5% until "at least the fourth quarter of 2010." Rising prices Nationwide's latest profits included £40m from the acquisition of the former Dunfermline Building Society's social housing portfolio, the company said. It added that it had an estimated 8.3% share of the UK residential mortgage market. Nationwide operates as a mutual society, and is owned by its members. Unlike a listed company owned by shareholders, its main aim is not necessarily to maximise profits. It is the UK's biggest building society and provides a leading house price index. In its latest survey, Nationwide found that UK house prices in October were higher than a year earlier - the first annual rise for 19 months. Property prices were 2% higher than in the same month the previous year, with the average home costing £162,038. "Much of the increase in prices this year has been caused by an unusually low level of properties available for sale rather than a robust recovery in house purchase transactions," said Mr Beale. He added that high unemployment and the continued squeeze on lending meant "setbacks" in house prices in the future would not be surprising. This would be accentuated if more sellers emerged and interest rates rose quicker than expected. Lending Building societies have traditionally been more prudent in their mortgage lending, and the latest half-year figures show that the number of Nationwide customers getting into trouble with home loan repayments was relatively low. The proportion of mortgage accounts three months or more in arrears with payments by the end of September was little changed from the the previous six months, at 0.66%. "Low interest rates have underpinned the housing market by improving mortgage affordability and keeping mortgage arrears and possessions lower than they would otherwise have been," said Mr Beale. Losses expected from the mergers with Derbyshire and Cheshire and the purchase of Dunfermline's assets were factored in at the time of the deals, and were "in line with expectation," Nationwide said. The squeeze on lending meant that, in the last six months, only those able to offer a significant deposit were able to secure home loans. The average loan-to-value rate for new residential mortgages was 63%, little changed from the 60% of the previous six months. Nationwide described the savings market as "challenging" at times of low interest rates. "The size of the market has been contracting, as consumers choose to pay down their debt or seek higher returns from investment products with equity linked returns," Mr Beale said. |
| Source of this article : |
| From: www. bbc.co.uk/news - 20th November 2009 |
| Date of this item added : |
| 2009-11-23 |