Mortgages  

Yorkshire chief blames bank levy for reducing lending

Yorkshire chief blames bank levy for reducing lending

The UK’s second-largest building society has declared a core operating profit of £115.9m for the first half of 2015 but issued a warning about how much mortgage lending business it will be able to do in the future due to the bank levy.

Yorkshire Building Society today (23 July) has reported a 7.8 per cent increase on profits for the first half of this year compared with June 2014.

Mortgage balances were up more than £600m to £32.8bn, compared with £32.2bn in December 2014.

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A total of 15,430 mortgages completed and more than 85,000 savings accounts were opened during the period.

The lender reported £3bn of gross lending in the first half of this year, compared with £3.7bn in June 2014, and £630m net lending, down from £1.3bn in June 2014.

Four of out 10 house purchase mortgages were taken out by first-time buyers, including those with 5 per cent deposits. The lender boasted one in five of all UK offset mortgages were arranged through Yorkshire Building Society.

But Chris Pilling, Yorkshire Building Society Group’s chief executive, warned this level of lending may not be able to continue due to the bank levy, which was increased in the Summer Budget earlier this month.

Chancellor George Osborne announced that following increasing bank profits, and to reflect changes in bank regulation, the government is introducing a new 8 per cent tax on banking sector profits from January 2016.

The government is also introducing a phased reduction in the rate of the bank levy (which is charged on banks’ balance sheets) from 0.21 per cent to 0.1 per cent between 2016 and 2021.

Mr Pilling said: “We were proud that in the first six months of this year, we helped 3,386 people take a step on to the housing ladder, with two in five of our house purchase mortgages provided to first-time buyers.

“But this level of lending can only continue if we can retain our profits and reinvest them back into our business.

“The government’s proposal to introduce a bank surcharge of 8 per cent on all banking services organisations’ profits over £25m will unfairly hit the six largest building societies, with these institutions paying about a third of the additional £1.7bn expected to be raised over five years.

“As the six largest building societies were responsible for 50 per cent of the UK’s net mortgage lending in 2014, a tax which could impact our ability to fund growth in lending could have significant consequences for the UK mortgage market.

emma.hughes@ft.com