Santander prepares for bad debts and predicts cost of living challenges through 2023

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Santander warned of an uncertain outlook with higher mortgage rates and inflation posing challenges for customers “until 2023”.

The lender prepared for an impact on defaults by increasing provisions.

Santander reported gross mortgages in the nine months to October of £28.2bn in a strong market, up from £25.2bn in the same period last year.

However, £256m was set aside in credit impairment charges, compared to £170m at the same time last year.

Santander said it has not seen “significant deterioration” in the mortgage portfolio to date.

But pointed out that an environment of higher inflation, higher energy prices and interest rates could affect customers’ ability to make repayments.

Due to higher impairment charges, adjusted profit before tax fell 3% to £1.64 billion from £1.7 billion in 2021.

The bank has proactively reached out to more than 1.6 million customers deemed most affected by the cost of living crisis to highlight the support on offer.

Santander said he expected mortgages to be broadly in line with market growth this year.

Mike Regnier, UK Managing Director, said: “Many of our customers remain concerned about the impact on the cost of living and they are looking to us to help them navigate this challenging environment.

“As one of the UK’s leading mortgage providers, we particularly understand the concerns of existing mortgage customers, first-time buyers and especially those whose fixed rate mortgages are about to expire.

“We are therefore providing advice and guidance on how households can manage their mortgage, for example by exploring options regarding the length of the term.

“We are also continuing our program of proactive contact with customers in difficulty, to offer them assistance in managing their finances and their energy expenses.

“In this environment, we have maintained a focus on how we can deliver more to our customers with products that deliver real value.”

He added: “These are a set of results that reflect the hard work of our staff, but they also demonstrate the continued importance of taking a prudent approach to risk and maintaining a resilient balance sheet.

“While we have not seen any material deterioration in our mortgage portfolio to date, we have increased our provisions. Looking ahead, it is clear that continued inflationary pressures, rising energy prices and the impact on economic activity will mean that the service and support we provide to our customers and businesses will continue to be essential.

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