Lloyds says mortgage demand has begun to soften recently
As the country’s largest mortgage provider, Lloyds is considered a bellwether for the national economy
LLOYDS Banking Group says mortgage demand has begun to slow in recent months after the market’s strong start to the year.
In the first quarter, borrowers clamoured for home loans as mortgage rates fell from the 15-year high they reached last summer. But more recently, many home buyers in the UK have been in a wait-and-see mode as they await rate cuts from the Bank of England.
“Mortgage pricing came down quickly in January, and we were surprised by how quickly the mortgage market recovered,” chief financial officer William Chalmers said. “We’ve seen slightly lower demand in the second quarter.”
As the country’s largest mortgage provider, Lloyds is considered a bellwether for the national economy. Despite the recent slight softening in demand, the bank’s total loans climbed 1 per cent in the second quarter, with much of the gain coming from mortgages.
UK mortgage rates have steadily declined over the past year, with the average 2-year fixed rate home loan dropping to 5.79 per cent on Thursday from 6.83 per cent a year earlier, according to Moneyfacts Group. Still, many borrowers expect rates to fall even further when the Bank of England begins cutting rates.
But traders in recent months have been walking back their bets on when that will ultimately happen.
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The company posted pretax profit that beat estimates in the second quarter as an improved economic outlook allowed the lender to whittle down the amount of money it sets aside for souring loans.
The company set aside just £44 million in provisions for souring loans in the quarter, which was far less than the £323 million average of analyst estimates compiled by Bloomberg. That buoyed pretax profits, which also fell less than analysts expected to £1.74 billion in the quarter.
“We see the economy as very resilient, and we’re seeing our customers really weathering the challenging last few years,” chief executive officer Charlie Nunn said in a Bloomberg Television interview.
With interest rates remaining stubbornly high in recent months, the bank has been under pressure to offer savers better rates on their deposits.
The bank’s net interest margin – a key measure of profitability that shows the difference between what a bank pays out to depositors and collects from loans – slipped 2 basis points to 2.93 per cent in the quarter, which was in line with analysts expectations.
Nunn said Lloyds welcomed the new Labour government, which took charge in the UK earlier this month. He praised Prime Minister Keir Starmer’s decision to focus on areas like planning reform for growth.
“We agree that is the way to unlock improvement for all of our communities across the UK in the coming years,” Nunn said. BLOOMBERG
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