Britain's largest building society Nationwide saw a 40% drop in home loans over the past year and its market share shrank, as the credit crunch forced it to rely on savings to fund mortgage lending.
Nationwide, which became Britain's second-largest mortgage lender after its merger with Portman last year, said residential lending fell to £6.7 billion sterling in the year to April, from £11.2 billion - a market share of 7.1%.
That compares with an 11% slice of the UK market in the previous year, Nationwide's CEO Graham Beale said. Its share of prime home loans dropped to 5.2% from 9.2%.
Market conditions in the housing and mortgage markets are expected to remain 'subdued', but Beale said he saw the drop in UK property prices in 2008 remaining within a single-digit percentage, after Nationwide last month published the first annual decline in house prices in 12 years.
Nationwide said it had begun to shift to a more prudent policy early in the year after expanding aggressively in 2007, but net lending fell away most sharply in the second half, as wholesale markets dried up and it turned to savings.
The group's £8.9 billion of total net lending - including commercial lending - was covered by retail deposits of 9.1%, as it benefited from the 'flight to quality' after the near-collapse of lender Northern Rock and took a 19% share of the savings market.
Beale said Nationwide had seen mortgage arrears edge up to 0.36% from 0.31%, well below an industry average of 1.2% and largely due to the merger with Portman.
The group said its underlying pretax profit rose to £781m, from £669m the previous year, an increase of 17%.
