Santander UK saw a rise in annual profits following a boost from higher interest rates, but the bank has flagged rising numbers of borrowers falling behind with repayments.
The bank highlighted a “modest” increase in customer arrears across mortgages, credit cards, unsecured personal loans and overdrafts in recent quarters.
Its mortgage borrowers faced paying £250 more a month on average in repayments in 2023 due to higher rates.
The lender said just one per cent of its customers who remortgaged last year were struggling to keep up with repayments.
Santander said it is predicting interest rate cuts this year
PA
Santander said it is predicting interest rate cuts this year, falling from 5.25 per cent to 4.5 per cent by the end of the year as inflation falls.
This is expected to “ease cost of living pressures for customers”.
The bank expects the Bank of England to first cut interest rates in May.
The central bank hiked the base rate 14 consecutive times in recent years before voting to hold it at a 15-year high of 5.25 per cent since last summer.
While falling rates will be good news for borrowers, it is set to take a toll on the group’s profitability.
Santander UK reported a 13 per cent increase in annual pre-tax profits to £2.1billion for 2023, which is an increase from £1.9billion in 2022.
Pre-tax profits dropped 25 per cent quarter on quarter to £418million in the final three months of 2023, however, the result was three per cent higher year on year.
Chief executive Mike Regnier said: “During 2023 our focus has been on supporting our customers through the higher cost of living and increased interest rates.
“As we look ahead to 2024, we expect interest rates and inflation to fall.”
The CEO said it would continue to keep an eye on costs as more and more customers shift to online and mobile banking.
Santander UK currently has 450 bank branches.
Mr Regnier said the branch network remains “under review” but said there are no immediate plans to close further branches.
He said: “This is something that every bank keeps under review.
“If demand for face-to-face services continues to drop, we need to provide that service cost-effectively.”
