Brexit honeymoon over for Nationwide as referendum fallout begins to bite

Nationwide Building Society has announced results showing a drop in consumer spending in the wake of the Brexit vote has seen its nine-month statutory pretax profit drop by 6 per cent.

Britain’s second-biggest mortgage provider posted a profit of £886m for the nine months which ended on December 31, down from £946m a year earlier.

While the economy remained resilient immediately after the country’s June 2016 EU vote, Nationwide said there were signs of a slowdown in 2017.

Net lending for prime mortgages, which includes most products other than buy-to-let mortgages, was £4.3 billion, down from £7.3 billion in the same quarter of 2016.

Nationwide gave up sales volumes to maintain its margins. As a result lending to home owners fell during the quarter. Gross mortgage lending fell to £24.1 billion in the third quarter, down from £26.2 billion in the same period the previous year. That gave the Swindon-based society a market share of about 12 per cent, down from 14 per cent in 2016.

Nationwide’s specialist mortgage division recorded a net redemption of £400 million, down from a net lending figure of £900 million a year earlier.

The lender has significantly increased its capital strength over the past nine months and said that it had managed to maintain its net interest margin, the gap between what it pays savers and what it charges borrowers, at 1.33 per cent. It expects the margin, however, is likely to fall this financial year and next, it said.

“Household spending, a key driver of growth, lost some momentum. Retail sales and car registrations have slowed and consumer confidence has also softened,” chief executive Joe Garner said.

Subdued economic activity and a squeeze on household budgets will continue to pressure house prices and profits, Nationwide said.

Its cost to income ratio rose to 59.6 per cent from 57.6 per cent on higher defined benefit pension costs.

Nationwide also took a new £28 million charge for additional claims against mis-sold payment protection insurance, as more people have made complaints before the Financial Conduct Authority’s August 2019 cut-off point for applications.