Although the mortgage price war has not affected these larger retail banks to the same extent as building societies and challenger lenders, most still reported the competitive market had impacted their profits and margins.
For example, Barclays reported a total income of £3.57bn, an increase from last year, but said this had been “offset by mortgage margin compression”, while Lloyds’ said its net interest margin had narrowed by five basis points since H118 due to “continued mortgage competition”.
A “fall in income due to the highly competitive mortgage market” impacted Santander’s profitability as its net interest margin dropped 11 basis points and its profit before tax was down 36 per cent year-on-year to £575m.
Santander reported this was also down to pressure from the mortgage back book as more customers opted to come off the standard variable rate.
Data from Moneyfacts showed the average rate of a two-year fixed — 2.49 per cent — is more than 1 percentage point lower than the average in August 2014 (3.54 per cent).
Longer term fixes have dropped even more substantially. In August 2014, the average five-year fixed sat at 4.22 per cent, compared with 2.84 per cent in today’s market.
The Bank of England has warned lenders it is “watching them like a hawk” amid the price war, cautious that lenders do not opt for riskier lending to make up for lost margins.
imogen.tew@ft.com
What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know.
