RBS 2012 Annual Report Download - page 189

RBS GROUP 2012
187
UK Retail Ulster Bank RBS Citizens (1)
2010
Performing
£m
Non-performing
£m
Total
£m
Performing
£m
Non-performing
£m
Total
£m
Performing
£m
Non-performing
£m
Total
£m
<= 50% 19,568 246 19,814 3,385 186 3,571 5,193 45 5,238
> 50% and <= 70% 24,363 345 24,708 2,534 152 2,686 4,902 79 4,981
> 70% and <= 90% 31,711 588 32,299 3,113 179 3,292 7,029 137 7,166
> 90% and <= 100% 7,998 319 8,317 1,958 121 2,079 2,459 67 2,526
> 100% and <= 110% 4,083 260 4,343 2,049 137 2,186 1,534 53 1,587
> 110% and <= 130% 1,722 202 1,924 4,033 358
4,391 1,425 61 1,486
> 130% and <= 150% 57 16 73 2,174 297 2,471 599 28 627
> 150% — — — 355 131 486 589 36 625
Total with LTVs 89,502 1,976 91,478 19,601 1,561 21,162 23,730 506 24,236
Other (2) 1,090 24 1,114 — — — 762 30 792
Total 90,592 2,000 92,592 19,601 1,561 21,162 24,492 536 25,028
Total portfolio average LTV (3) 68% 81% 68% 91% 106% 92% 75% 94% 76%
Average LTV on new originations during the year 68% 79% 66%
Notes:
(1) Includes residential mortgages and home equity loans and lines (refer to page 188 for a breakdown of balances).
(2) Where no indexed LTV is held.
(3) Average LTV weighted by value is arrived at by calculating the LTV on each individual mortgage and applying a weighting based on the value of each mortgage.
(4) Excludes mortgage lending in Wealth. This portfolio totalled £8.8 billion (2011 - £8.3 billion; 2010 - £7.8 billion) and continues to perform in line with expectations with minimal provision of £248 million.
Key points
UK Retail
x The UK Retail mortgage portfolio totalled approximately £99.1 billion
at 31 December 2012, an increase of 2.8% from 31 December 2011.
x The assets are prime mortgages and include £7.9 billion, 8% (2011 -
£6.9 billion) of residential buy-to-let lending. There is a small legacy
portfolio of self-certified mortgages (0.2% of the total mortgage
portfolio). Self-certified mortgages were withdrawn in 2004. The
interest rate product mix is approximately one third fixed rate with
the remainder on variable rate products including those on managed
rates.
x UK Retail’s mortgage business is subject to prudent underwriting
standards. These include an affordability test using a stressed
interest rate, credit scoring with different pass marks depending on
LTV as well as a range of specific criteria, for example, LTV
thresholds. Changes over the last few years include: a reduction in
maximum LTV for prime residential mortgage lending from 100% to
95% in the first quarter of 2008 and from 95% to 90% in the third
quarter of 2008 and a tightening of credit scoring pass marks: credit
score thresholds were increased in the third quarter of 2009 and
again in the third quarter of 2010. In the first quarter of 2011, new
scorecards were introduced alongside a further tightening of
thresholds, these were tightened still further in the second quarter of
2012.
x Gross new mortgage lending remained strong at £14 billion. The
average of individual LTV on new originations was 65.2% weighted
by value of lending (2011 - 63.0%) and 61.3% by volume (2011 -
58.4%). The ratio of total lending to total property valuations was
56.3% (2011 - 52.9%). Average LTV by volume is arrived at by
calculating the LTV on each individual mortgage with no weighting
applied in the calculation of the average. The ratio approach is the
sum of all lending divided by the value of all properties held as
security against the lending.
x The maximum LTV available to new customers remains at 90%,
except for those buying properties under the government-sponsored,
and indemnity backed, new build schemes that were launched
during the year, where the maximum LTV is 95%. These schemes
aim to support the mortgage market, particularly first time buyers,
and completions under the scheme totalled £35 million during the
year.
x Based on the Halifax Price Index at September 2012, the portfolio
average indexed LTV by weighted value of debt outstanding was
66.8% (2011 - 67.2%) and 58.1% by volume (2011 - 57.8%). The
ratio of total outstanding balances to total indexed property
valuations is 48.5% (2011 - 48.4%).
x The arrears rate (more than three payments in arrears, excluding
repossessions and shortfalls post property sale) improved
marginally to 1.5% at 31 December 2012 from 1.6% at 31 December
2011. The number of properties repossessed in 2012 was 1,426
compared with 1,671 in 2011. Arrears rates remain sensitive to
economic developments and are currently benefiting from the low
interest rate environment.
x The mortgage impairment charge was £92 million for 2012
compared with £182 million in 2011 primarily due to lower loss rate
adjustments on the non-performing back book, and a stable
underlying rate of defaults.
x 25.6% of the residential owner occupied UK Retail mortgage book is
on interest only terms down from 27.3% in 2011. A further 9.1% are
on mixed repayments split between a combination of interest only
and capital repayments (2011 - 9.6%). UK Retail withdrew interest
only repayment products from sale to residential owner occupied
customers with effect from 1 December 2012. Interest only
repayment remains an option on buy-to-let mortgages. At 1.6%, the
percentage of accounts more than 3 payments in arrears was similar
to the 1.4% observed on capital repayment mortgages.