Nationwide says house prices set for modest dip
Nationwide Building Society has predicted UK house prices could avoid the hefty falls seen in 2008 despite buyer confidence being hit by government spending cuts.
The mortgage giant said the likelihood of low interest rates until late 2011 would help limit price declines, although it said the market would remain weak amid austerity measures.
Its forecast comes as Nationwide posted half-year results showing a 26% rise in underlying profits to £147m.
The group said its margins - which have been hammered by historic low interest rates - had now turned the corner and said this would drive "a strong upturn" in future profits.
The UK's biggest building society said it expects prices to remain largely flat over the next few months, but dip "modestly" throughout 2011 as the supply of properties for sale outstrips the number of buyers in the market.
The group's profits were helped by sharply lower levels of struggling borrowers, with bad debts down by 44% to £179m in the six months to September 30.
Losses on commercial property loans nearly halved, down 47% to £95m.
But Nationwide confirmed the trend for lower mortgage business seen among its high street banking rivals this year as it reported negative net lending - loans less redemptions - of £1.8bn.
Its share of the mortgage market fell from 9.2% in the previous six months to 8.5%.
A strong ISA season helped it see a marked recovery in savings deposits, which have been impacted by low interest rates since the recession struck.
The mutual reported £400m in net retail deposits against £6.1bn outflows a year earlier.
Graham Beale, Nationwide chief executive, said the group had traded profitably despite "uncertain market conditions".
The group has swallowed up a number of smaller rivals since the onset of the financial crisis, merging with the Derbyshire and Cheshire building societies and taking over ailing Dunfermline's savings assets.
The group plans to axe its network of 130 third-party agencies and wants to reduce branch and retail distribution outlets, which total more than 1,000, and trim a 20-strong network of back office and administration centres.