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Nationwide predicts strong end to year despite dip in third quarter mortgage lending

"We expect competition in the mortgage market to continue", said Nationwide CEO Joe Garner
Nationwide expects the consumer spending slowdown to hold back the housing market

Nationwide Building Society PLC(LON:NBS) said it expects a strong end to the year despite reporting a drop in mortgage lending in the third quarter.

Mortgage lending fell to £24.1bn in the third quarter from £26.2bn the same period a year ago amid a slowdown in the housing market. Profit fell to £886mln from £946mln last year as consumer spending and confidence weakened following the Brexit vote. The British lender said subdued economic activity and the ongoing squeeze on household incomes from rising inflation is “likely to exert a modest drag on housing market activity and house price growth”.

Low interest rates will also continue to put pressure on its margins, it added.

Nationwide expects house prices to be flat in 2018

British house prices rose modestly in January but fell in London, data from the Royal Institution of Chartered Surveyors showed on Thursday.

Nationwide chief executive Joe Garner said the company expects house prices to be broadly flat in 2018 with “perhaps a marginal gain” of around 1%.

“We expect competition in the mortgage market to continue and we will prioritise quality over volumes in the long-term interests of our members,” Garner said.

The group expects the economy to continue to grow but only modestly as consumer spending slows, holding back the housing market.

Nationwide has improved its capital strength in response to Brexit uncertainty and a clampdown from the Bank of England on lenders. The common equity tier 1 ratio, a measure of capital, rose to 30.5% from 25.4% on April 4.

Nationwide predicts strong fourth quarter 

Nationwide said it predicts a strong final quarter of gross lending as mortgage reservations in the third quarter were much higher than a year ago.

The group’s net interest margin, the gap between what it pays savers and what it charges borrowers, was steady at 1.33% but sees this falling this financial year and next.

The cost to income ratio increased to 59.6% from 57.6% on higher defined benefit pension costs.

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