Nationwide recorded underlying pre-tax profit of £1.3bn for the six months to September (Paul Faith/PA) (PA Archive)
Nationwide Building Society has boosted its profits and reported record-high financial benefits for members as it said its savings rates are better than rival banks in the market.
Higher borrowing costs helped boost the group’s earnings despite lower mortgage lending as a result of the softening housing market.
The group reported underlying pre-tax profit of £1.3 billion for the six months to September, up from £980 million a year earlier.
The group is owned by its members, not shareholders, meaning it can hand out around £344 million in payouts to eligible members this year.
Its total underlying income increased by more than £250 million due to rising interest rates, meaning it took in more cash from loans.
The building society revealed that its financial returns to members have reached £885 million, showing it is delivering more interest to savers than other banks in the market.
Debbie Crosby, chief executive of Nationwide, said: “Nationwide is performing strongly, and our strategy is to protect the future strength of the society and provide a great way to bank for customers.
“We are the main challenger to shareholder-owned banks and use our mutual position to make a meaningful impact on communities and improve society.”
Deposits rose by £4.2bn as more savers shopped around for better fixed-rate savings deals and Nationwide said it was driving customers switching from other banks.
Nationwide chief financial officer Chris Rhodes said: “This is a very competitive market and we expect it to become even more competitive.
“But we pay rates above the market average so we would expect to benefit from the flow of deposits into our products.
“Customers are certainly looking to save as much as they can in this environment.”
But mortgage lending has declined in the latest period amid a downturn in the housing market, with higher borrowing costs affecting some people’s ability to buy a home.
The lender said that while mortgage rates have started to turn around, affordability is likely to drag on for some time.
Mr Rhodes said: “We think we are very close to, if not already at, the peak of base rates… We now have five and two year mortgages with rates below 5%.
“As we move forward, you would expect the swap curve to come down further, and so fixed rate mortgages will start to decline.”
But Mr Rhodes said it was likely to take up to two years to stimulate demand in the housing market rather than any immediate boost.
Nationwide said customers have proven more resilient than expected despite struggling with a higher cost of living.
The building society revealed that the benefits of support measures introduced in the government’s “mortgage charter” earlier this year have been far less than people using Covid payment holidays.
This means fewer borrowers are choosing to take action such as extending their mortgage term, reducing monthly payments or switching to interest-only payments for six months.
However, the level of borrowers falling behind on their payments has increased slightly in the latest period, although less so, as higher rates and persistent inflation continue to impact households.