Santander’s mortgage lending fell by £10.1bn in the first nine months of the year, an update for the bank has revealed.
In its Q3 quarterly management statement, Santander said its decision to "optimise the balance sheet given higher funding costs" has seen a reduction of £10.1bn in mortgage lending.
This was attributed by the major lender to a slower housing market and higher mortgage rates which led to a fall in applications.
Speaking on this, Santander chief executive officer, Mike Regnier, said: “We have delivered a good set of results in spite of a challenging macroeconomic environment.”
Brokers' opinions
Brokers have suggested that results such as these have been the main contributor to the rate war in recent months.
Yellow Brick Mortgages managing director, Stephen Perkins explained that lenders have been “scrapping over the remaining crumbs of new lending opportunities”.
Perkins, pointed out that these results will be similar across all the major lenders who are “all far below their lending targets.”
He added that rates are “unlikely” to reduce significantly in the next 12 months, so lenders are setting expectations that their lending volumes will remain reduced for the foreseeable future, also with lower margins as they compete for business.
Looking ahead
Santander looked ahead in its results, stating: “We expect high-for-longer interest rates to have a more pronounced impact on households and businesses.”
In response, EHF Mortgages managing director, Justin Moy, said: “The ‘higher-for-longer’ scenario with rates is certainly not going to help either the property or mortgage markets.”
He explained this is because, if the cost of borrowing remains high, it will meaningfully impact what buyers can afford to pay and will drive further reductions in property prices.
“It will also keep the current trend of product transfers strong, as affordability is challenged and rates are competitively priced compared to the wider market,” he added.
A similar sentiment was shared by Switch Mortgage Finance director, Elliot Culley, who said: “This statement from Santander is in line with the Bank of England’s forecast of having to maintain the base rate at current levels to reduce inflation in 2024.”
However, Culley pointed out that, looking back over the last year and a half, and comparing what has happened with mortgage rates to what was forecast, “it didn’t turn out as expected”.
He added that, if mortgage rates do reduce further, then the market will become stronger and house prices will start to stabilise.
However, if they stay around current levels we are likely to see a slower return to the market until people start to realise this is the new normal.
“After almost a decade and a half of abnormally low rates, this may not happen overnight, which will stall demand for property and could put further downward pressure on prices,” he added.
Thanks to the Newspage community for sharing their thoughts with FTAdviser.
