Nationwide BS  

Nationwide profits hit by low interest rates

Nationwide profits hit by low interest rates

Low interest rates have hit Nationwide’s profits, which were £696m for the first half of the year.

But the nation's biggest building society also saw record prime mortgage lending and record numbers of new current accounts opened in the first half of the 2016 to 2017 financial year from April.

Nationwide’s chief executive Joe Garner said the building society has been faced with a reduction in net interest income due to low interest rates coupled with competition in the mortgage market and decisions it has taken around rates.

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He said: “We have made a number of pledges to help our savers and borrowers.

“These include protecting selected savings rates to minimise the impact of the base rate change and helping our members with variable rate mortgages by passing on the base rate decrease in full.

“These conscious decisions and those taken over recent years have contributed to a reduction in profits in the first half of the year in line with expectations, demonstrating our commitment to putting members' interests at the heart of everything we do.”

Yesterday the Co-operative Bank said it would be making 200 people redundant because of “cost challenges” presented by the prolonged low interest rate environment.

Nationwide said today that if interest rates remain at their current low level it will “constrain margins” while a move to an interest rate of zero may reduce incentives for people to save and impact the building society’s business model.

The Bank of England has signalled that it would be prepared to cut rates further from their 0.25 per cent level if it is needed.

Gross prime mortgage lending at Nationwide over the period was £14.7bn, up 23 per cent on the same period last year.

The building society said it alone accounted for one-third of UK net mortgage lending over the past five years.

Meanwhile 377,000 current accounts were opened over the six-month period, an increase of 36 per cent on the first half of 2015/16.