Britannia pays the price as mortgage arrears go soaring

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Britannia, the number two mutual lender after Nationwide, said profits before tax had fallen 36% in the past half-year compared with 12 months earlier as it was forced to set aside "impairment provisions" of £40 million for expected losses from arrears.

For every 100 Britannia mortgage customers, just under two have been unable to make their monthly repayments — a figure that has been rising considerably during the growing economic crisis.
Arrears were rising most sharply on mortgages with high loan-to-value advances made to first-time buyers. New city-centre flats that have plummeted in value in the housing downturn are also proving to be a big source of arrears, it said.

However, Britannia stressed that such mortgages made up only 8% of its total mortgage book and that it had taken action in 2007 and 2008 to tighten its lending criteria. Most of the loans were made by the group's Platform business which sells through mortgage intermediaries. They were generally made in the heady days of 2006 and early 2007 when prices were sky-rocketing.

The building society's overall pre-tax profits after the impairment provisions were £36.2 million in the six months to 30 June against £56.3 million a year earlier. In the prior-year period practically no provisions at all were made.
Chief executive Neville Richardson said: "This is a strong performance in a market that is unrecognisable from the same period in 2007."
Along with other lenders, Britannia has been scaling back its lending to maintain the quality of its loan book and liquidity.

The number of mortgages approved by lenders across the country in the year to June halved, according to figures yesterday from the Council of Mortgage Lenders. It warned the situation was likely to deteriorate, while the number of home loans granted to first time buyers sank to just 18,100 in June — 46% lower than a year ago.