Nationwide has warned that "intense competition" in the mortgage market could hit its lending figures and market share next year.
It comes as the UK's largest building society saw its profits fall by 10 per cent to £628m in the six month period ending in September.
Nationwide increased its gross lending by £300m to £15bn compared to the same period last year but chief executive Joe Garner warned of tough times ahead.
He said: "Competition in the mortgage market remains intense, and shows no sign of abating.
"Although mortgage volumes remain strong, we're prepared for the possibility that intense competition combined with declining consumer confidence may lead to a moderation in gross lending and market share in the second half of the year."
He said there were a number of factors weighing on the British economy, including the uncertainty surrounding the UK's departure from the European Union, the highest level of inflation in five years and wages which are shrinking in real terms.
The building society's lower profits have been attributed to lower one-off gains than in previous periods.
In the first half of the previous year Nationwide's profit figure was boosted by £100m from the disposal of its investment in Visa Europe while in this period the building society's only one-off gain was the £26m sale of its investment in VocaLink.
Deposit balances grew by £1.8bn - down from £4.7bn in the same period last year - in what Nationwide has said is a "challenging market".
Mr Garner said: "There are some signs of a squeeze on household finances from low wage growth and above-target inflation.
"Our member panel tells us people are beginning to cut back, particularly on savings and discretionary expenditure, which is not surprising when real incomes are falling."
Nationwide saw its net interest income rise by 4 per cent to £1.51bn due to lower funding costs, which also helped off-set the lower mortgage margins brought about by the highly competitive market and meant its net interest margin increased to 1.34 per cent.
The building society added that the mortgage market would remain "highly competitive" and it is predicting that its net interest margin will "trend lower" during the second half of the year and into 2018/19.
damian.fantato@ft.com
