collected by :Victor Alphen
Nationwide’s net interest margin – or the difference between the interest it earns by charging customers with loans and mortgages and the interest it pays out for deposits – was squeezed by low interest rates, falling by £126million to £3billion.
Nationwide Building Society has reported a dip in annual profits as it feels the impact of record-low interest rates and increased competition in the mortgage market.
Nationwide said it expects ongoing pressures of low interest rates and competition in the mortgage market, but added that it was off-setting some of this with cost-cutting efforts.
The building society offers some of the best savings rates on the market – its FlexDirect tops the current accounts’ league, paying 5 per cent interest.
However, it continued to attract more customers, with mortgage lending rising 3 per cent £33.7billion.
low interest rates, falling by £126million to £3billion
Image copyright PAProfits have fallen at Nationwide after the building society sought to protect savers from the impact of last year’s interest rate cut.
The Bank of England cut its benchmark interest rate to a record low of 0.25% last summer following the Brexit vote.
Nationwide said it kept rates unchanged on some savings accounts while passing on the rate cut to its mortgage customers.
Mr Rennison said: “We chose to protect savers from the full effects of last summer’s interest rate cut, knowing that this would reduce our full year profitability in the continuing low interest rate environment, but considering this to be in our members’ best interests.”
The rise of 35% represented one in seven of all new accounts opened.
Profits were hit as Nationwide provided its members with £380 million of additional interest payments compared with the market average after maintaining its savings rates despite the Bank of England cut.
In all, Nationwide said that it had given its members back £505 million over the course of the year, including passing on…
The building society left its savings rates unchanged after the Bank of England cut and passed on the full benefit to borrowers PA:Press AssociationNationwide Building Society reported a 17 per cent drop in profits for 2016 and blamed the fall on the cost of not passing on the impact of a cut in interest rates to savers.
Britain’s biggest mutual made a statutory profit last year of £1.05 billion, down £225 million year on year, even as it opened a record 795,000 accounts and its gross mortgage lending hit an all-time high of £33.7 billion.