NatWest: Consumer confidence improving but Budget and US election weighs on mood

Activity in the housing market has picked up and consumer confidence has improved, despite uncertainty around the UK Budget dampening sentiment, NatWest has said.

The bank revealed it grew its mortgage lending in recent months amid an increase in the number of applications being sent by borrowers.

Chief executive Paul Thwaite said it was being driven both by first-time buyers and homeowners remortgaging.

“As mortgage prices have come down, we have seen increases in activity both at an overall market level and at a NatWest level,” he said.

“Based on applications that we’ve seen during the third quarter, we’re confident around mortgage volumes as we see out the rest of the fourth quarter but also into 2025.”

NatWest revealed on Friday it made an operating pre-tax profit of £1.7 billion between July and September, 26% higher than the £1.3 billion generated this time last year.

The increase was partly driven by an increase in lending and the amount of money customers deposited with the bank.

It joins high street rivals Lloyds and Barclays in unveiling higher profits than analysts were expecting this week, as the banking sector continues to  strengthen as interest rates start to fall.

NatWest, which has about 19 million customers across the UK, also said it had seen confidence among consumers and businesses improve compared with last year.

This is reflected in the bank’s spending data, with debit card spending slightly higher than the previous year across most categories.

Customers spent more at retailers across nonessential items, with clothing up about 4% over the latest period compared with last year, while shoppers benefited from lower inflation on fuel payments and grocery spending.

Mr Thwaite said: “Whilst discretionary spending on smaller items like clothing has risen, we are seeing larger purchases being delayed, with consumers saving at a higher rate than they were pre-pandemic.”

For example, NatWest data showed that the volume of spending on furniture and home decorations dipped 3% year-on-year, although it has started to improve in recent weeks amid growing activity in the housing market.

However, uncertainty around the upcoming autumn Budget and other global events has led sentiment to weaken in recent months.

Mr Thwaite said: “That uncertainty is not just around the UK Budget, it relates to the US election and it relates to some of the geopolitical tensions as well.

“I think what everybody is looking for is to get beyond those events… and that should give a degree a certainty and confidence.”