Mortgage business drops at Nationwide

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The Independent Online

Nationwide Building Society is expected to admit tomorrow that new mortgage business has shrunk by as much as a third following a controversial decision earlier this year to stop offering eye-catching short-term deals.

The strategy, introduced in May, was very unpopular with mortgage brokers, who mostly stopped recommending Nationwide's products to new customers.

As a result, Nationwide's interim results tomorrow are likely to show that the building society has lost hundreds of millions of pounds in mortgage business in the past six months.

If Nationwide's new lending has fallen by about a third, this would wipe £2bn from the value of it's mortgage book, leaving the society with gross lending in the region of £4bn in total for the six months to the end of September.

The UK's fourth-largest lender may also have plunged into the psychologically damaging territory of a decline in net lending.

Net lending shows whether a business is growing because it measures mortgages taken out with a lender against customers who have gone elsewhere. If Nationwide suffered the same level of redemptions in the past six months as the last time last year, its net lending may be hovering around the zero mark.

Ray Boulger, a senior analyst at the financial advisers Charcol, said: "Business through brokers has collapsed so I expect gross lending to be down by a third. Net lending could have become negative. If it is positive it will only be by a small margin."

Nationwide scrapped short-term discounts in a bid to offer a fairer deal to existing customers. Many brokers recognised the new deal was fairer to borrowers who stuck with it in the long term. But they pointed customers in the direction of short-term discounts with rival lenders on the basis that they could hop from one deal to another over the mortgage period.

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