The mortgage market is finally returning to pre-pandemic levels, Virgin Money said today, after more than a year of subdued activity.
The bank revealed that lending was flat in the three months to 31 December at £72.8 billion, with mortgage lending dipping slightly. The business says it took a “disciplined approach to trading” as mortgage rates soared last year.
But amid hope that the Bank of England would cut interest rates soon, the market improved. Virgin Money said there were “early signs” activity in January that is now “back to 2019 levels”.
According to Bank of England data, monthly mortgage approvals have remained between 10% and 20% below 2019 levels ever since the mini-Budget, which put an abrupt end to the post-pandemic rebound in activity.
The lender said: “Looking ahead, the Group expects customer sentiment in mortgages to continue to improve, given the emergence of more positive trends at lower customer rates.”
CEO David Duffy said: “We have made a positive start to the year, with strong Q1 results in line with our guidance. We've delivered growth in new accounts, deposits and target lending segments, at stable margins and with ongoing cost efficiencies.
“We are encouraged by both our customers' resilience and improving sentiment in the mortgage market as interest rates have peaked.
“We carry good momentum into 2024 as we continue to successfully execute our strategy.”
Virgin Money’s net interest margin - the difference between lending and borrowing interest rates - dipped to 1.89%. Its provisions for bad debts rose a little more to £639 million.
Russ Mould, investment director at AJ Bell, said: “The big worry whenever a bank updates on trading is the level of bad debts given the fragile backdrop. Virgin Money reported a ‘modest increase’ in its provisions, which certainly hasn’t troubled the market.”
During the quarter, Virgin Money closed 39 branches, as previously announced. That brings its branch network to 91. It cut 150 jobs, with more reductions expected to follow.
Analysts at Peel Hunt said the update was “broadly reassuring”.
