Leeds reports rise in long-term mortgage balances

Michael Lloyd

August 2, 2019

Leeds Building Society has reported its long-term mortgage balance has increased in its H1 results.

In the first half of the year the society’s residential mortgage balances was £16.5bn, up by 4.4% from £15.8bn at 31 December 2018. This was supported by new lending of £1.9bn, compared to £1.8bn June 2018.

However, year-on-year the society’s profit decreased from £60.1m in the first six months of 2018 to £49.4m in the first six months this year.

Richard Fearon (pictured), chief executive officer of Leeds Building Society, said: “The society stays true to the purpose for which it was founded, to help people save and have the home they want, and we continue to lend responsibly and grow in a prudent and carefully-managed way.

“This is despite the challenging headwinds in the UK economy and the impact of cooling consumer confidence.

“As expected, increased competition and the effects of slowing economic growth have had an impact on our profit levels. Similarly, we knew our ongoing investment in member value and our digital capabilities would affect profits – while these have reduced this year they remain at a healthy level.

“Our cost to income and cost to mean asset ratios of 49.4% and 0.50% respectively are among the best in the sector, and we retain our keen cost focus.”

Leeds said that sustained pressure on mortgage pricing and high levels of refinancing has translated into lower mortgage income and, without an equivalent reduction in funding costs, has suppressed net interest income.

The society added that underlying strength of the mortgage book remains high, with a low level of arrears and continued high quality security.

It recognised that the worsening view of forecast economic conditions has negatively impacted expectations of credit losses and resulted in increased charges for impairment loss provisions.

Fearon added: “Following planned high levels of growth over several years, the society has made a conscious choice to moderate increases in mortgage and savings balances to focus on margin.

“We’ll continue to pursue our strategy of supporting borrowers who are not well-served by the wider market – such as through shared ownership, interest-only and buy-to-let – as we keep looking for new ways to respond to the evolving needs of our members.

“We’ve also built on last year’s launch of our Retirement Interest-Only proposition and seen rising demand in this new segment of later life lending.

“Our commitment to long term stability for the benefit of our membership as a whole means we are well-placed to withstand economic shocks and market uncertainty.”

The society’s chief operating officer, Karen Wint, has told the board that she plans to retire next year.

Fearon said: “Karen has made an outstanding contribution over many years to assuring the long term success of the society by leading our people and diversity agenda, making Leeds Building Society an employer of choice, improving our IT and cyber resilience and initiating the move to our new Leeds headquarters.

“I would like to thank Karen for her tremendous care and passion for the society.”

Customer satisfaction levels remained high at 92% compared to 91% in June 2018.

Sign up to our daily email