The business, which owns the country’s largest mortgage lender Halifax, says its net interest income, the difference between interest earned on loans and paid out for savings, lifted 19% to £3.4bn in the period.
But it added that “higher net income was more than offset by impairment charges as a result of the revised economic outlook” in the third quarter.
The July-to-September quarter covers a period that saw rises in energy, food and interest rates, as well as the government’s mini-budget.
The lender says loans and advances to customers lifted 2% since the end of December to £456.3bn — including growth of £1.8bn in the open mortgage book in the third quarter — alongside higher retail unsecured loan and credit card balances.
Lloyds Banking Group chief executive Charlie Nunn says: “The current environment is concerning for many people and we are committed to maintaining support for our customers.”
SelfEmployedMortgageHub.com founder Graham Cox comments: “The higher impairment charges and reduced profits Lloyds is seeing are likely to be replicated across the banking sector.
“After having pandemic life-support switched off, many businesses are now struggling with much higher input costs and reduced demand. And with property prices inflated by Rishi Sunak’s stamp duty holiday and ultra-cheap credit, the chickens are now coming home to roost in the mortgage market.
“It’s quite conceivable house prices could fall 20-30% over the next couple of years, meaning impairment charges could start to get a whole lot bigger.”
Riverside Mortgages owner Lewis Shaw adds: “With the recent political and economic turmoil, it’s unsurprising that Lloyds Banking Group is preparing for problems caused by rocketing mortgage rates, at the same time as energy bills are increasing.
“I hope this isn’t a sign of things to come but when a lender of this magnitude decides to plant their flag in the ground we should all sit up and take note. They know the game and I trust the way they play.
“However, let’s put this in context, because of Halifax, Lloyds Banking Group are the biggest mortgage lender in the UK therefore they do need to protect themselves, more so than others.”
UK Moneyman director Malcolm Davidson says: “There’s little doubt that cases of mortgage arrears will increase to some extent due to the recent spike in interest rates, which was caused by our previous Prime Minister’s unfunded, un-voted for fiscal experiment, which has now been thrown out like a disused lettuce.
“Mortgage rates have started to drop this week and we can only hope that the upcoming rise in the Bank of England base rate was already factored into the mortgage increases we saw and the worst of this is now behind us.”
