Members of the Nationwide Building Society could be in line for their share of a £340 million cash pot after it posted its strongest financial results on record. Payments are to be made to eligible members following the success.
However, it issued a caution over reduced activity in the mortgage market and subdued house prices over the rest of the year. The mutual lender saw its underlying pre-tax profit surge to £2.2 billon in the year to April, from £1.6 billion this time last year.
Its total underlying income jumped to £4.7 billion from £3.9 billion the previous year. The “strong financial performance” has allowed it to launch the Nationwide Fairer Share Payment, reports PA.
This means eligible members will receive £100 into their current accounts in June. Some 3.4 million members should benefit from the payment, which the building society said was the first of its kind for the group.
Nationwide said it was about rewarding members “who have the deepest banking relationships with us”. It is also introducing the Nationwide Fairer Share Bond with competitive interest rates.
The bond, which will have a 4.75% two-year fixed rate, is available to all 16 million members. But chief executive Debbie Crosbie said the economic outlook remains uncertain and households could struggle to adjust to higher interest payments.
She said the squeeze on household incomes has led to “reduced mortgage market activity and lower house prices which are expected to remain subdued in the second half of 2023”.
Subscribe here for the latest news where you live
She added: “Overall, our borrowers are relatively well placed to withstand challenges in the medium term, given the significant proportion of borrowing on fixed rates, and the relatively low number of borrowers who spend a high proportion of their income on debt repayments.
“However, the transition to higher interest payments is a challenge for households as they adjust their expenditure priorities. We will continue to support those borrowers who face payment difficulties.”
Some 275,000 borrowers will see their fixed-rate mortgage deals expire over the next 12 months, Nationwide said. As a result, they could see their monthly payments go up significantly.
But such customers saw their affordability stress tested against rates between 6% and 7% when they took out their mortgage, meaning they could be more likely to withstand higher rates. Furthermore, the lender stressed that existing customers fixing to a new mortgage can get access rates of around 4%.
The proportion of people falling behind on their monthly mortgage payments remains low, but cost-of-living pressures and higher rates mean this level is expected to rise in the future, Nationwide said. It resulted in a jump in the group’s impairment charges – money set aside to cover expected losses from bad loans – to £126 million over the past year.
It also noted a drop in mortgage market activity, which particularly suffered after September’s mini budget, but said there were “green shoots” of positivity with activity picking up. The building society is sticking by its pledge to not leave any town or city in which it is based without a branch until at least 2024.
