Nationwide: Rates will remain low

20 November 2009 08:10am

Building society Nationwide forecast a protracted recovery from recession and interest rates at record lows until "at least" the final quarter of next year.

Nationwide also said it expected rising unemployment would "inevitably" push house prices downwards in 2010.

The gloomy predictions came as the UK's biggest building society's underlying pre-tax profits slid to £117 million in the six months to September 30 - 63% below last year's £322 million.

Chief executive Graham Beale said Nationwide's performance was squeezed by low interest rates and the "dramatic fall" in commercial property valuations - cutting margins and lifting impairment charges.

These bad debt provisions totalled £317 million, compared with £74 million in the same period last year and £320 million in the six months to April 2009.

Mr Beale said the charges were in line with expectations and highlighted the firm's ability to remain profitable despite challenging markets.

But he warned: "Economic recovery is forecast to be slow and we expect interest rates to remain at their current level until at least the fourth quarter of 2010.

"We are also cautious on future prospects for the housing market. The growth in house prices over recent months appears to be driven by lack of supply, and growth in unemployment throughout 2010 will inevitably exert downward pressure on house prices."

Bad debt charges on commercial property loans rose to £180 million, from £146 million in the previous six months and £25 million in the same period last year.

Nationwide predicted the declines in the commercial property market had reached their bottom and said related losses in the second half would be no worse and "may even be better" than the first six months of the financial year.

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