Santander UK posted first-quarter pre-tax profit up 11% to £547m, but adds that it expects house prices to jump 10% this year, falling back to 2021 levels.
The high street lender says its mortgage balances fell 2.2% to £183m in the three months to the end of March compared to the previous quarter, as applications home loan applications across the market have slumped 37% year-on-year.
The bank says UK consumers face a difficult year ahead, with inflation and interest rates touching 40-year highs, at 10.1% and 4.25%, respectively.
It says: “The economic outlook for 2023 remains uncertain. Inflation is forecast to be above the 2% target rate for 2023 putting further pressure on real disposable income.
“We expect house prices to decrease by 10% in 2023, falling back to 2021 levels.”
The bank says its profits lifted largely due to the impact of higher base rate charges, rising net interest income and a stronger net interest margin – the difference between what it pays out to savers and what it charges lenders.
Santander UK chief executive Mike Regnier says: “Following rises in the base rate, we have seen the most competitive ISA period for several years and a further slowdown in the mortgage market.”
He adds: “The economic outlook for 2023 remains uncertain with inflation predicted to remain above the 2% target meaning many households and businesses will continue to face difficult decisions in the months ahead.”
