06 February 2024 , 12:33
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High street bank Virgin Money UK has reported a dip in total mortgage lending amid a slowdown in the housing market.
However, it's not all doom and gloom as they've spotted signs of a housing market rebound. The lender revealed a 2.2% decline in mortgage lending to £57.1 billion in the three months to December, from £58.4 billion in the same period a year earlier.
They attribute this fall to a disciplined approach to lending in a "subdued" market. Despite this, the bank noted early signs of improvement in the housing market in January.
Residential and buy-to-let mortgage applications are more in line with 2019 levels before the pandemic hit. Virgin Money predicts that lower mortgage rates will boost consumer sentiment, as interest rates have now "peaked".
However, provisions for bad loans grew to nearly £640 million from £617 million in the previous quarter, meaning it set aside more cash for people falling behind on repayments. While the number of customers falling into arrears on credit cards continued to increase, overall arrears remained broadly stable.
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The amount of cash deposited with the bank grew by 1.7% to £67.3 billion, from £66.2 billion the previous year, as it added 27,000 net "active" customer accounts during the quarter. Virgin Money, with a customer base of about 6.6 million at the end of 2023, is focusing on cost-cutting and promoting online and mobile banking.
The bank revealed it's on track to save £200 million annually through restructuring, having closed 39 branches recently, resulting in around 150 job losses. This means it has reduced its branch network by 30%, leaving 91 physical stores, and also cut its office space by over a third.
The bank expects to have spent roughly £275 million on restructuring costs, including IT system improvements, property changes, and job cuts. Last year, Virgin Money announced plans to invest £130 million in artificial intelligence and technology to combat cybercrime over three years.
The bank reported "good early progress" on this programme in its latest investor update. David Duffy, Virgin Money's chief executive officer, said: "We've delivered growth in new accounts, deposits and target lending segments, at stable margins and with ongoing cost efficiencies."
He added: "We are encouraged by both our customers' resilience and improving sentiment in the mortgage market as interest rates have peaked." Duffy concluded: "We carry good momentum into 2024 as we continue to successfully execute our strategy."
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