NatWest says it retreated from race towards cheaper mortgage deals last year

The banking group said new mortgage lending totalled £5.2 billion in the first three months of the year, down from £9.9 billion the previous year.

Anna Wise
Friday 26 April 2024 10:38 BST
(Matt Crossick/PA)
(Matt Crossick/PA) (PA Wire)

Your support helps us to tell the story

From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.

At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.

The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.

Your support makes all the difference.

NatWest has revealed its mortgage lending nearly halved at the start of the year as it retreated from parts of the market when competition among lenders stepped up.

The banking group said new mortgage lending totalled £5.2 billion in the first three months of the year, down from £9.9 billion the previous year.

Paul Thwaite, NatWest’s chief executive, said demand for mortgages reduced throughout 2023 and there were fewer deals on offer.

He added: “Because the market was relatively thin, price competition was very high and we took a conscious decision at that point to not compete across all segments during the latter part of the third and fourth quarter.

We think that the pressure is easing for retail consumers. There is evidence they're starting to feel a bit more confident, albeit they're continuing to take control of their budgets

Paul Thwaite, NatWest's chief executive

“We wanted to ensure we could get the right returns from the capital we were deploying.”

He said that explains the year-on-year decline in lending, but added that mortgage applications had since increased by about 25% and the lender has grown its share of the market to more than 12%.

The group, which also includes Royal Bank of Scotland and Coutts, reported an operating pre-tax profit of £1.3 billion for the first quarter, down 27% from £1.8 billion the previous year.

It is ahead of the £1.2 billion profit analysts were pencilling in for the quarter.

Total income for the bank fell by a 10th as more customers moved money from current accounts and into savings accounts with higher returns.

But NatWest revealed that customer deposits increased by £2 billion in the first quarter, reflecting growth in savings and current account balances since the end of 2023.

It also assured that the level of borrowers defaulting on loans remained low, despite the cost-of-living squeeze.

Mr Thwaite said there are signs that customer sentiment is improving since households were squeezed by cost-of-living pressures in recent years.

“We think that the pressure is easing for retail consumers. There is evidence they’re starting to feel a bit more confident, albeit they’re continuing to take control of their budgets.

“That’s primarily driven by expectations of reducing inflation and also a likely reduction in Bank of England base rates.

“But it is important to be balanced – there still are some challenges. The cost of living continues to impact household budgets for those customers who are rolling off mortgages, likely on to higher payments.”

Such customers are seeing average monthly repayments go up by around £250, he said.

Mr Thwaite said NatWest was taking the “necessary steps” in preparation for the Government to launch a sale of its remaining shares in the bank to retail investors, after bailing it out during the 2008 financial crisis.

He said decisions around the timing and structure of the sale were a matter for the Treasury, which previously said it could come as early as the summer.

The Government has said it hopes to fully offload its stake by 2025 to 2026.

Shares in NatWest were up more than 4% on Friday morning.

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in