Nationwide has warned that mortgage arrears are rising as the building society reported increased profits on the back of higher interest rates.
Higher borrowing costs after the Bank of England raised interest rates 14 times since the end of 2021 have caused financial pain for some mortgage holders while benefiting savers.
Nationwide said its residential mortgage arrears had increased from historically low levels but were below the industry average.
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The lender added: “Further increases in arrears from current levels are expected, due to both inflation and higher interest rates negatively impacting household finances.”
Nationwide flagged higher interest rates, continued inflationary pressures and the uncertain economic outlook as key risks.
It has boosted its mortgage impairment provisions to £305m from £280m in April. More customers are taking up measures offered under the mortgage charter introduced by the government to help those struggling with higher mortgage costs, although only 5,000 customers were on interest-only payments at the end of September.
Like other lenders, Nationwide has benefited from higher interest rates, which have its income. Underlying profit before tax rose to £1.3bn in the half-year to 30 September from £980m a year earlier. Statutory profit rose to £989m from £969m after the first “fairer share” payment to the building society’s members, which totalled £344m.
The one-off payments of £100 were made to 3.4 million members over the summer but some labelled the scheme “unfair”, with some longstanding customers and people holding multiple Nationwide products angry at being excluded.
