Coventry Building Society increased its gross mortgage lending in the first half of this year, but reported that increased competition in the market has pushed the lender’s net interest margin down.
In the six months ending in June 2018, the building society advanced £4.6bn of mortgages compared with £4.4bn at the same point a year earlier.
However, Coventry’s net interest margin decreased from 0.99 per cent in June 2017 to 0.93 per cent this year - a drop the lender attributed to increased price competition in savings and mortgages reducing new business margins.
The net interest margin is the difference between the interest a lender earns from mortgage loans and the amount they pay out on deposits savers hold with them.
At the moment a lot of lenders are seeing their margins squeezed because the mortgage market is so competitive they are pushing their interest rates down, so they are earning less on their mortgages.
Mark Parsons, chief executive at Coventry Building Society, said the net lending of £1.5bn in the first six months of 2018, compared with £1.6bn in 2017, equates to an estimated 10 per cent of marketshare and follows the sale of a £351m buy-to-let mortgage portfolio in June of this year.
The building society’s savings balances increased by £0.4bn in the first half of 2018, with overall deposits reaching £31.4bn - a figure reported as a record level for the lender.
Mr Parsons said: "These results show a strong start to the year, in which we continued to outperform the market in terms of growth in savings and mortgages, continued to pay considerably more to our savers than the market average and further improved our service to members."
rachel.addison@ft.com
