Nationwide said its half-year pre-tax profit lifted 2.1% to £989m from a year ago due to higher income – but mortgage lending plunged 62% to £12.1bn, adding that the housing market “is anticipated to remain subdued in the short term”. 

The mutual says residential mortgage balances edged up 0.3% to £202.3bn from April, “maintaining our market share of mortgage balances in a competitive market”. 

Deposits balances increased by 2.3% to £191.3bn from April “supported by competitive fixed rate products and increased levels of accrued and capitalised interest due to higher average savings rates”. 

Nationwide chief executive Debbie Crosbie says: “The housing market has slowed and house prices have edged lower as a result of the higher interest rate environment. 

“While activity is anticipated to remain subdued in the short term, income growth and lower fixed rate mortgage rates should help to improve housing affordability over time.” 

The lender adds that 0.38% of its residential mortgage accounts were at least three months in arrears at the end of September, up from 0.32% in April. 

It adds: “Further increases in arrears from current levels are expected, due to both inflation and higher interest rates negatively impacting household finances.” 

Crosbie says: “Encouragingly, economic activity, while still weak by historical standards, has held up better than expected, and there are signs that cost-of-living pressures are starting to ease.  

“However, conditions for households are likely to remain challenging in the near term, as the effect of previous interest rate increases feeds through and labour market conditions soften.” 

Many UK lenders have reported a run of strong profits buoyed by Bank of England base rate rises that have lifted 14 times since December 2021 to 5.25%.             

However, markets are concerned about tougher competition for savers’ cash and potential loan defaults in a cost-of-living crisis have weighed on the sector.