Nationwide chief remains defiant

BRITAIN'S biggest building society, Nationwide, insisted today that it was lending prudently despite a 159% blow-out in net loans.

Nationwide extended a record £7.5bn of extra credit to its 1.2m mortgage and credit card borrowers in the six months to 4 October. That compares with £2.9bn in the year-earlier period.

Chief executive Philip Williamson said he was 'pinching remortgage business principally from the five big guys - Halifax, Abbey National, Northern Rock, Cheltenham & Gloucester and Barclays'.

In the past six months the society doubled its mortgage market share to 15.7%.Williamson said the huge increase in lending was through customers of rival lenders 'voting with their feet' and by better customer retention.

The loan to value ratio - a key measure of potential risk - was just 40% across the mortgage book. 'The business we do is extremely prudent,' he added.

Potential borrowers had to be able to cope with an increase of 3% in the base rate before their loans were approved, he said.

Nationwide is forecasting the base rate to rise from the current 3.75% to 4.75% by this time next year. Williamson, who has twice lifted his house price forecast for this year, sees a soft landing for next year, with prices still showing double-digit percentage growth.

Nationwide's disclosure on lending comes a week after Bank of England Governor Mervyn King warned households not to take on debt they could not afford.

The building society also reported a 22% rise in pre-tax profits to £188m. New credit card accounts were up by 61% and current accounts by 25%.

Williamson said borrowers had been penalised in recent months, with the society's standard variable-borrowing rate lifted by 0.25% more than the base rate. But this was to give better terms to its 11 million savers, he said. Borrowers were still better off than with most rivals.

He also took a swipe at the recent relaunch of Abbey National: 'Sometimes you can change the label on a tin of paint. When you open it up though, it's the same old tin of paint.' As of 1 December, Nationwide's standard lending rate of 4.89% would still be 0.86% cheaper than Abbey's, he said.

UCB Home Loans, the offshoot that lends without requiring proof of earnings, lifted gross mortgage advances by 50% to £1.2bn.