In Focus: Home ownership  

Worried borrowers should explore term length, says Santander

Worried borrowers should explore term length, says Santander

Mortgage borrowers who are worried about the impact of the cost of living should explore options around extending their term length, Santander has said.

In its quarterly results released today (October 26) the bank acknowledged that many of its customers remain concerned and said it is providing advice and guidance on how households can manage their mortgage as a result. 

It said although it has seen no material deterioration in its mortgage book to date, it has increased its provisions nonetheless. 

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Santander chief executive, Mike Regnier said: “Looking ahead it is clear that the ongoing inflationary pressures, increased energy prices and impact on economic activity will mean the service and support we provide our customers and businesses will continue to be critical."

The bank’s mortgage lending remained robust, as customer loans increased by £9.6bn (4 per cent), with £9.8bn of net mortgage lending.

The bank noted that the cost of risk remained very low.

Santander said it expects its net mortgage lending to be broadly in line with market growth for the year.

However it noted that the outlook remains uncertain, with higher inflation leading to an increased cost of living and a drop in real disposable income this year. 

Santander said: “Mortgage interest rates have risen with the expectation of further increases to base rate and are likely to remain substantially higher than a year ago. These challenges for households and businesses are expected to continue well into 2023 and could impact credit impairments.”

Overall in the UK, profit for the nine months of 2022 was stable at £1,133mn. 

Total income was up 10 per cent driven by strong net interest income growth of 12 per cent, benefitting from higher interest rates and a resilient mortgage market, according to the bank. 

The bank’s operating expenses grew slightly driven by transformation spend and inflationary pressures, however, in real terms, underlying costs decreased 6 per cent reflecting the savings generated from the bank’s transformation programme. 

For mortgages, the average loan-to-value was 50 per cent, down from 52 per cent at the start of the year, while 85 per cent of lending was prime UK retail mortgages.

Buy-to-let, as a proportion of the bank’s loan book sat at 9 per cent, up from 8 per cent at the start of the year. 

While 88 per cent of the bank’s loan book was on a fixed rate, up from 84 per cent at the start of the year. 

Elsewhere in the results, the bank also unveiled a package of measures to support Santander staff, including a new helpline that focuses on financial wellbeing. This follows the bank’s pay increase for 11,000 employees in August to help with the increased cost of living.