Nationwide has issued a warning about the increase in mortgage arrears even as the building society reported heightened profits due to elevated interest rates. The Bank of England's 14 interest rate hikes since the end of 2021 have led to higher borrowing costs, causing financial strain for some mortgage holders but benefiting savers.
While Nationwide revealed a rise in residential mortgage arrears from historically low levels, it emphasised that they remained below the industry average. The building society highlighted key risks, including higher interest rates, persistent inflation, and an uncertain economic outlook.
In response to these challenges, Nationwide has increased its mortgage impairment provisions to £305m, up from £280m in April. The government's mortgage charter has seen more customers availing measures to cope with increased mortgage costs. However, as of the end of September, only 5,000 customers were on interest-only payments.
Like other lenders, Nationwide has experienced positive effects from higher interest rates, leading to increased income. In the first half-year to September 30, underlying profit before tax rose to £1.3bn from £980m a year earlier. Statutory profit increased to £989m from £969m after the initial "fairer share" payment to Nationwide's members, amounting to £344m.
Despite the positive financial results, the building society faced criticism for its "fairer share" scheme, with some customers expressing dissatisfaction with the exclusion of certain groups from the one-off payments