As mortgage lending rates rise, Nationwide Building Society has announced a surge in profits leading to its “best ever half-year” of lending.
These profit figures were driven by 14% increase in the amount lent as residential mortgages, bringing the total now up to a record high of £14.9 billion. Indeed it ‘s not just Nationwide enjoying a boost in lending figures; the Council of Mortgage Lenders announced that across the board this year, the amount being borrowed by homeowners in Britain has now reached a peak the likes of which has not been seen since 2008.
Graham Beale, Nationwide ‘s soon-be-CEO, has predicted that following the small housing market boom that has led to this increase in profits for the building society, the likelihood is that the market will start to correct itself and prices should moderate.
Beale described the housing market in London in particular as unsustainable, given how far price growth is outstripping wage growth and indeed price growth for the rest of the UK.
In the year to September, house prices in London had gone up by 10.6% to £443,399 which amounts to more than triple the rate of growth that we saw for national average wages. Over the same period, house prices for the whole of the UK went up by only 3.8%; significantly less than London but still slightly more than national average wage growth.
“I ‘m expecting a natural correction of prices in London” said Beale.
“Nationally, we ‘ve got wages going up around 3% and house prices going up by about the same amount but in London the appreciation is significantly ahead of the national average. It ‘s in the low double digits. There will be a point where people can not afford to buy at these levels. There will be a natural dampening.”
While Beale ‘s outlook for the capital relies upon the marketing simply bowing down to natural pressures of unaffordability, he believes that throughout the rest of the UK, it will continue plodding along as usual – with demand consistently outdoing supply and prices going up steadily by around 4% across the board. He pointed to increased post-electoral certainty as a factor for the steadying of the market in general, comparing this year favourably to “last year when we had the uncertainty of the vote in Scotland and the general election.”
Beale said that he did not expect the impending referendum on our EU membership to have a similar effect on the housing market to last year ‘s Scottish vote. “Whether we vote in or out,” he said, “I think the UK housing market is largely a domestic one.”
Beale, who will be stepping down as CEO in place of the current head of BT Openreach, Joe Garner, to the opportunity to look both back and forwards at the state of the banking market and at the future of the mutual building society system under the current Chancellor ‘s current tax framework.
Beale has expressed concern about Nationwide ‘s inclusion in the tax surcharge to be applied to banks that George Osborne announced in his budget, given the building society ‘s mutual status.
“Nationwide is not a bank and serves a social purpose of facilitating home ownership and promoting a savings culture,” he said, “the tax surcharge will have a disproportionate effect on building societies and we believe that it represents a missed opportunity to support diversity in the UK financial services.”
In emphasising the need to differentiate between banks and building societies, Beale pointed to what he described as failures on the part of many who converted from the latter to the former over the last 20 years, citing “Halifax, Abbey, Woolwich and Bradford & Bingley.”
However, despite his disagreement over the chancellor ‘s tax proposals, Mr Beale nonetheless gave a generally positive outlook for the future of Britain ‘s biggest building society saying, having spoke on what will most likely be his last set of figures: “I ‘ve never felt as confident or optimistic for the future of this organisation. It ‘s a great place to be.”