LLOYDS Bank offered a boost to home owners and those trying to get on the property ladder today when it said prices will rise, but the cost of new mortgages will fall.
Its prediction that the Bank of England will cut rates three times by the end of the year – starting sometime in the summer – is consistent with earlier forecasts.
But it has changed its mind on house prices which it now expects to rise 1.5% this year, much better than a 2.2% fall previously predicted.
Chief financial officer William Chalmers said there is a “more benign economic outlook”, and that the housing market had proved more resilient than expected.
It also says unemployment will stay low – good news since Lloyds is seen as a proxy for the performance of the wider UK economy.
It reported a 28% fall in first quarter profits to £1.6 billion.
There was an impairment charge of £57 million compared to loans of £448 billion. There was less mortgage lending in the quarter than in the prior period as customers sat tight with worries about the cost of living swirling.
Lloyds reassured the City by saying results this year would be in line with expectations, though profit margins will fall to 2.9% from 3.22%.
Britain’s biggest bank insisted it will keep supporting customers.
CEO Charlie Nunn said: “Guided by our purpose, we are continuing to support customers and successfully execute against our strategic outcomes… This underpins our ambition of higher, more sustainable returns that will deliver for all of our stakeholders as we continue to Help Britain Prosper.”
Lloyds shares have been in the doldrums for years. Today they slipped 2% to 50p. They are down 18% over five years.
Lloyds has set aside £450 million to cover possible costs from a regulatory probe into car loans.
Gary Greenwood at Shore Capital thinks the shares are a buy. He said: “We note that the Group has not taken any further provision in respect of the FCA’s review into discretionary motor finance commissions.”
Zoe Gillespie, investment manager at RBC Brewin Dolphin, said: “Lloyds’ numbers have begun to slow, which was to be expected as interest rates appear to have peaked and competition in the mortgage market heats up. While the bank’s profits and net interest margin may have been squeezed, they are still at strong levels. More generally, Lloyds appears to be in relatively rude health and in a good position to manage the potential fall of interest rates later in the year.
Nigel Farage, the former UKIP leader, said last year he had opened a new bank account with Lloyds following the “debanking” scandal at NatWest owned Coutts.
