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Britain’s Nationwide Cautions Soaring Inflation May Weaken House Prices – Cryptovibes.com – Daily Cryptocurrency and FX News

UK Nationwide Building Society


Summary

  • Annual profit nearly doubles to 1.6 billion pounds
  • Warns of an economic hit from inflation
  • House prices under pressure, but market robust so far – experts

Nationwide Building Society said on May 20 that soaring inflation could send British house prices into a surge, in one of the most indisputable warnings yet that the intensifying cost of living crisis could put an end to the country’s housing boom.

British lenders have taken advantage of the booming housing market – partly propelled by lifestyle changes and pent-up demand after pandemic lockdowns – but this may not last, Nationwide warned.

Nationwide’s outgoing chief executive Joe Garner said:

“The emergence of higher inflation, which has been exacerbated by the war in Ukraine, is likely to exert a significant drag on the economy in the near term. There is a risk of a downward movement in house prices, given the pressure on household budgets.”

Banks have grown increasingly cautious of the impact of higher prices on household budgets, with inflation at levels not witnessed since the 1980s. House prices have been climbing at double-digit rates every year, but there have been signs of a fresh downturn.

Andrew Burrell, the chief property economist at Capital Economics, stated:

“We think there is enough momentum in the market currently to prevent outright falls in 2022, but we expect prices will drop by around 5% in total in 2023-4 and also that transactions will be much weaker.”

Nationwide, which is Britain’s second-largest issuer of mortgages, said housing activity continued to be above pre-pandemic levels in 2022. Vicki Harris, chief commercial officer at Kensington Mortgages, commented:

“Whether [inflation pressure] turns into an actual reduction or drop in house prices, remains to be seen over the coming months.”

STRONG PROFIT

Nationwide’s warning came accompanied by its annual results, which showed its pretax profits nearly grew twice as much to 1.6 billion pounds ($2.00 billion) for the year to April 4.

Its finances were elevated by a strong economic bounce back from pandemic lockdowns, including a 6.9 billion pound leap in gross mortgage loans. It was Garner’s final set of results in charge before former TSB CEO Debbie Crosbie succeeds him on June 2.

Nationwide is rivals with the country’s major banks. But unlike them, it is owned by its customers. The lender said member benefit, a gauge of benefits it gives above the market average, stayed under its target at 325 million pounds because of strong price competition in mortgages and low-interest rates.

Its listed bank rivals NatWest (NWG.L) and Lloyds (LLOY.L) in April announced rising profits but warned of a potential hit to gains from Britain’s cost of living crisis.

($1 = 0.8019 pounds)



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