Nationwide warns of inflation’s impact on struggling customers

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Nationwide executives have said they are “highly concerned” about the outlook for inflation, warning that rising costs could harm already struggling customers and drag down house prices.

In its annual earnings report, the member-owned building society said it had not yet experienced an increase in defaults on loans or mortgages.

However, it warned that surging inflation, which hit a 40-year high of 9% last month, would put “significant pressure” on household budgets, particularly for people on lower incomes who built up less savings during the Covid lockdowns.

“Obviously we are highly concerned about the outlook environment,” the chief executive, Joe Garner, told journalists. “And we are very focused on leaning into our members, and really underlining the emphasis of contacting us as early as possible.”

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He suggested lenders such as Nationwide were better equipped to handle the cost of living crisis today, having already helped customers through periods of uncertainty including Brexit and Covid lockdowns. Garner explained that the building society was ready to offer a range of options to struggling customers, including interest-only payment holidays.

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However, the building society, which is the UK’s second-largest mortgage lender behind Lloyd’s Banking Group, explained that higher property prices, rising interest rates, and the “steep increase” in the cost of living meant housing had already become less affordable for consumers.

Those financial pressures will also mean people will be more cautious about spending money on new homes, which was likely to impact house prices. “There is a risk of a downward movement in house prices, given the pressure on household budgets”, Nationwide said.

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“We expect housing market activity to slow and the rate of house price growth to moderate in the coming quarters,” it added.

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Nationwide’s monthly housing survey showed that the average amount paid for a home in the UK climbed 0.3% to £267,620 in April from a month earlier, though that compared with a 1.1% rise in March. It was also the smallest increase since September last year.

It could impact Nationwide’s profit growth, having nearly doubled its annual profits in 2021 when it benefited from stronger economic conditions and a buoyant housing market. Nationwide said on Friday that annual pre-tax profits grew from £823m to £1.6bn.

“While the outlook remains challenging, the society continues to demonstrate its resilience,” it said.

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