Lloyds Banking Group has reported a 28% drop in pre-tax profits in the first quarter, from £2.3bn to £2.6bn on an annual basis.
Mortgage lending fell by 1%, from just under £308 billion in the first quarter last year to around £305 billion in the first quarter of this year.
The bank says the drop in lending was expected due to the high number of refinancings in the last quarter of 2023.
Profits were affected by lower mortgage interest income, a new sector-wide levy from the Bank of England and by the cost of redundancy payments for furloughed employees.
But there is said to be an “improvement” in new mortgage arrears this quarter.
In a call with reporters earlier today, Chief Financial Officer William Chalmers said he expects pressure on margins “to ease until 2024,” according to Reuters.
He said the bank was anticipating “brighter economic prospects going forward” and still expected three cuts to the Bank of England’s base rate this year.
AJ Bell investment director Russ Mold said: “The company has seen competition in the mortgage market drive down its returns and savers move deposits into higher interest accounts – meaning it pays out more to customers.”