Yahoo Finance Lloyds profits hit by rush of homeowners refinancing mortgages
Lloyds Bank profits were hit by a rush of homeowners refinancing their mortgages as households sought to take advantage of better rates.
Higher levels of mortgage refinancing between January and March led to more churn in Lloyds’ mortgage book, denting the bank’s profitability.
The bank’s net interest margin (Nim), which measures the difference between what lenders earn on loans and mortgages, and what they pay savers, fell to 2.95pc from 3.22pc last year.
Lloyds’ mortgage book was down £1.8bn in the first quarter overall as customers refinanced their mortgages.
Homeowners hit the pause button when it came to fixing their mortgages at the end of last year owing to economic uncertainty over rates, but moved quickly to take advantage of better deals at the beginning of this year, Lloyds said.
Finance chief William Chalmers said the refinancing “overhang” from the end of 2023 had been expected by the bank.
He said: “This represented customers just pausing in terms of their willingness to re-engage in the mortgage market, and choosing to do so in the first quarter instead.”
The group posted a £1.6bn pre-tax profit in the first quarter, which was about £34m below analyst forecasts and down by 28pc compared with a year earlier. Revenues were £4.5bn
Charlie Nunn, chief executive of Lloyds, is midway through an ambitious four-year turnaround.
He is seeking to make Lloyds a slimmer and more profitable bank, cutting costs and boosting sales by offering customers more products such as wealth management services and insurance.
Mr Nunn said: “The group is continuing to deliver in line with expectations in the first quarter of 2024, with solid net income, cost discipline and strong asset quality.”
Lloyds, which owns Halifax, is one of the UK’s largest mortgage providers.
The bank issued an upbeat assessment for the housing market and the UK economy.
Mr Chalmers said mortgage applications were up 20pc versus the same period last year, but expects this to slow during the rest of 2024.
The lender has stuck by its interest rate cut forecasts by the Bank of England, and still predicts three rate cuts this year with the first occurring during the summer.
Lloyds also said it took no further charges related to the potential impact of the motor finance investigation by the Financial Conduct Authority (FCA).
The bank booked a £450m provision related to the possible costs of the redress scheme in February.
The FCA is investigating a number of lenders over historic commissions paid to car dealers linked to the rate of interest charged to borrowers buying a vehicle.
Costs at the bank rose more than expected during the period, mainly because of the impact of a Bank of England levy charged on all banks.
