Santander set aside £321mln for mortgage repayment defaults in 2022 as the bank braces for housing prices to fall back.
In 2023, a 10% fall in house prices is expected by the Spanish bank, driven by growing interest rates and a 1.3% shrinking of the UK economy.
“We expect house prices to fall back to 2021 levels over the year ahead as higher base rates dampen demand,” said the multinational bank.
The Bank of England today raised UK base rates by 0.5% to 4% with a further increase predicted by economists for March.
Mortgage lenders Barclays, Natwest and HSBC will post full-year reports in the next fortnight- with Santander’s forecasts likely an indicator of what’s to come.
The company also made £65mln of credit provisions in the fourth quarter as the recession continue to weigh on the UK.
Money set aside for bad debts increased by 38% year on year compared to the £233mln set aside in 2021.
The bank stated: “The outlook remains uncertain as inflation has eroded real disposable income with the prospects of a recession ahead.
“These challenges for households and businesses are expected to continue into 2023 and could impact credit quality.”
Santander reported arrears from mortgage borrowers remained low in 2022 despite a small number of businesses failing to make payments at the end of the year.
The UK bank saw underlying profits rise 2% to £1.89bn in 2022, it revealed in its full-year report today.
Net mortgage lending was at £9.8bln in 2022, increasing by 30% from 2021s £7.5bln - although demand for loans fell in the final three months of the year.
“The end of 2022 saw a marked slowdown in mortgage lending and, with an uncertain economic outlook for 2023, we will continue to focus on a prudent approach to risk while we help people and businesses prosper,” said Mike Regnier, chief executive at Santander UK.
The bank revealed the cost of fraud and scams doubled compared to 2021 costing Santander’s UK arm £153mln.
Overall, the Spanish bank’s profits jumped by 18%, rising to €9.6bln in 2022.