Lloyds profits surge as mortgage applications hit 12-year high

Lucy Burton
·2-min read
Lloyds 
Lloyds

Lloyds Banking Group has returned to profit after demand for mortgages rocketed to its highest level since 2008. 

Britain's biggest high-street bank said pre-tax profits reached £1bn for the three months to September, almost double City estimates of £588m, following a boom in home lending and a much smaller than expected provision for soured loans. 

It said mortgage lending was up by £3.5bn over the period, marking the highest period for mortgage applications from both first-time buyers and home movers since 2008. 

Property sales have soared since lockdown as buyers are rushing to complete before the March stamp duty deadline.

Property website Zoopla said this week that the post-lockdown property “mini-boom”, combined with the temporary tax break, means there are an extra 140,000 sales in the pipeline compared to a year ago

Chief executive António Horta-Osório said demand is also much stronger than expected due to a "shift in customer behaviour" during lockdown, when some decided after spending more time at home that they want to live in bigger houses outside cities. 

However, experts have feared that mass redundancies when the taxpayer-funded furlough scheme ends will create a legion of forced sellers unable to afford their mortgages. That could hurt house prices and result in bad loans piling up for banks.

Lloyds is still bracing for a softening of the economy in early 2021. 

Like its rivals, Lloyds is putting money aside to cover the cost of loans and mortgages that might not be paid back. 

In the third quarter it put aside another £301m to cover the cost of soured loans to families and businesses - significantly below last quarter and down on analyst forecasts of £700m.

Lloyds also said that it expects losses for this year to be at the lower end of its £4.5bn to £5.5bn range. This is based on economic scenarios that currently assume Brexit negotiations will result in a free trade agreement, however. 

The lender reported its third quarter figures days after HSBC also unveiled better-than-expected results but warned that it could start charging for basic banking services as the industry faces the prospect of negative interest rates.

Experts have warned that a change of course on free banking could prompt swathes of major rivals to follow suit in an industry-wide shift. 

British high street banks have suffered huge share price falls in the pandemic after cancelling their dividends.

Mr Horta-Osório did not rule out the move but said on Thursday that the bank's position on current account provision had not changed. 

Lloyds also said Robin Budenberg, who recently joined its board, will become chairman in January, replacing Lord Blackwell.

Shares rose 3.5pc to 28.6p in lunchtime trading but have move than halved since the start of the year.