The UK mortgage market is set to grow according to the high street bank Abbey, which reported a 25% jump in quarterly profits yesterday.

António Horta-Osório, Abbey’s chief executive, said that in spite of the UK’s struggling economy, unemployment had not yet risen to the level the bank had predicted, and house prices were also higher than expected in the current economic climate.

“I am prudently optimistic about our business prospects for the remainder of the year,” he said.

“In spite of this being a very negative environment, it is a little bit better than we thought, although not significantly. We had assumed house prices would fall by [a further] 10 per cent this year and that unemployment would rise from 5 per cent to 8.5 to 9 per cent.”

Mr Horta-Osório said that recent Bank of England rate cuts had had a positive effect and that Abbey, the UK’s second largest mortgage lender after Halifax, expected net lending to resume this year on a modest basis of between £10 billion and £20 billion. This signifies a marked improvement on earlier predictions, which estimated that net lending would be flat at best.

Abbey’s predictions come as the bank yesterday reported a 25% increase in pre-tax profits to £372 million for the first three months of the year. The jump in profits comes despite a rise in bad debts from £90 million in the final quarter of last year to £189 billion in the first quarter of this one. An increase in lending to small and medium-sized companies and homebuyers, as well as the acquisition of Alliance & Leicester last June and Bradford & Bingley in October after its nationalisation, both contributed to profits.

Abbey increased its mortgage lending by 2.5% over the first quarter of this year to 15%, with net new lending in the period reaching £800 million.

“I anticipate that we will continue to lend at this rate,” Mr Horta-Osório added.

This entry was posted on Thursday, April 30th, 2009 at 9:17 am and is filed under Banking, Loans, Mortgages. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.