Britain’s biggest building society Nationwide has reported a fall in first-half profits and warned it could face tougher trading in coming months amid the squeeze on consumers.
Pre-tax profits for the six months to the end of September fell 10% to £628m, though the lender said earnings would have increased but for one-off gains reported in the same period last year.
Nationwide said it was expecting the UK economy to continue to grow, though at a slower rate “due to the uncertainties around Brexit”.
Chief executive Joe Garner said: “The second half may bring tougher trading conditions, but we remain well placed to stand by our members in these uncertain times.”
The building society reported that gross mortgage lending fell by 5% to £16.7bn while impairment losses – a charge related to debts that go bad – nearly doubled to £59m.
Nationwide said loans were continuing to perform well but it had hiked the accounting provision amid “emerging indications that affordability is under more pressure from the impact of inflation”.
Mr Garner said that despite the recent interest rate rise, borrowing costs overall remained low.
But he acknowledged that low wage growth and rising inflation were “putting pressure on household budgets” and said the lender was “alert to signs of financial strain on consumers”.
Mr Garner said: “A number of financial factors are weighing on the economy and our members.
“On the one hand, employment is at or close to historic highs.
“On the other, uncertainty appears to be holding back investment, wages are shrinking in real terms, and inflation has ticked up to its highest level in in five years.
“Annual house price growth has moderated to 2% to 4% in recent months.
“And of course, uncertainty about Brexit continues.”
Mr Garner said the numbers of mortgage loans remained strong.
But he added: “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.”
Nationwide said it had helped a record 39,500 first-time buyers purchase a home over the six-month period, up from 38,600 a year ago, though the number of those moving or remortgaging was down slightly from 48,500 to 47,700.
The building society said it also saw record growth in current accounts, adding 427,000.