Home loans slump at Nationwide

BRITAIN'S biggest building society, Nationwide, admitted it had won virtually no new mortgage business since scrapping special deals for new borrowers last spring. Its share of net new mortgages slumped from 10.1% to 0.2% after it decided to offer all customers the same rates, instead of charging existing borrowers more to subsidise fancy deals for new homebuyers.

'All I can say is that we are very pleased with the way our strategy is unfolding. We are trying to change the nature of the mortgage market and it is not a one-lap race,' said chief executive-designate Philip Williamson.

In the six months to 4 October, Nationwide made net advances to borrowers of £100m, compared with £3.2bn in the same period last year.

However, the society described its so-called fair mortgage pricing initiative as a three-year strategy and is confident of making progress. 'Over the past few months, we've worked very hard to persuade the mortgage broking community that we have good deals to offer and in October our net advances were twice as big as in the whole of the previous six months,' said Williamson.

Almost all Nationwide's rivals offer discounts and incentives to new borrowers but the building society is determined to be different. 'The old system was uneconomical and unsustainable and we were big enough and brave enough to say so,' said Williamson.

Pre-tax profits for the half-year sank 18% to £206.8m after net interest income fell, expenses rose and a specific £21m provision was taken against bond investments. 'Our Treasury invests in all sorts of instruments, including corporate bonds, and it seemed prudent to make a modest provision given that one or two companies round the world are under a lot of pressure,' said Williamson.

Provisions against home loans remained very low as repossessions and arrears hit their lowest in 12 years. 'We have not seen any hint of deterioration in our mortgage portfolio,' said Williamson.

The society admits house price growth is slowing but it is optimistic about the economy. 'We do anticipate a slowdown but towards the end of next year things should pick up,' said Williamson.

Nationwide proved popular with savers, attracting 13.2% market share, double its natural market allocation.

NATIONWIDE has been knocked off the top spot in the annual Your Mortgage Awards. Mortgage intermediaries voted Abbey National the Best Overall Lender. Abbey's head of retail banking, Andrew Pople, said: 'This is a fantastic result and we are delighted to have won the award. Nationwide has held this top award for the past four years, so we're more than happy to move into first place in terms of influence and expertise in the mortgage market.'