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Abbey part of Spanish giants Santander have seen profits rise by more than 25% on that of a year ago.

Pre-tax profits for the group that includes Abbey, Bradford & Bingley and Alliance & Leicester rose by 25% to £372m. Revenue was up by 24%.

The company which cut costs by shedding 1,900 jobs at the end of last year, also said it was on course to cut costs by £180m by the end of 2011.

Santander however reported a 5% fall in net profit to 2.2bn euros ($2.8bn; £1.9bn).

“We have made a very strong start to 2009 with significant growth in profit and revenues. This is an excellent performance delivered in the toughest of economic environments,” Abbey said.

The company’s overall share of the UK mortgage market stood at 15%, while loans to small and medium-sized businesses rose by 10% over the three months.

The group opened 257,000 new current accounts during the period.

Santander’s profits were adversely affected by incorporating Alliance & Leicester and parts of Bradford & Bingley, it said.

The Spanish group bought Alliance & Leicester and the savings arm of nationalised Bradford & Bingley last year as the full effects of the global credit crunch took hold of the UK financial sector.

Nationwide is starting to introduce a two-tier mortgage system that will mean some of its customers end up paying much higher interest rates when their mortgage deals come to an end.The new system means Britain’s biggest building society will effectively have two standard variable rates  on the go at the same time one for existing customers, who will enjoy a  great rate of just 2.5%, and another for those taking out new mortgages from this Thursday will have to pay 3.99% when their mortgage deal ends.

It is a controversial move and Nationwide itself in the past has campaigned loudly for rival lenders “to treat both new and existing customers fairly” and not to use a two teir system.

In 2001, two-tier rates were the subject of a financial ombudsman ruling after several major lenders brought in lower SVRs but banned some existing customers from taking advantage of these, insisting they stay tied to the “old” higher standard rate.

But Nationwide said its move was very different, and added that with interest rates so low the time had come to focus on the needs of its 10 million savers.

The building society introduced its base mortgage rate (BMR) in 2001, which replaced its SVR. The BMR is guaranteed to be no more than 2% above the Bank of England base rate, which means it currently stands at a very competitive 2.5%. The society has 1.4 million mortgage customers, all of whom will either go on to the BMR when their current fixed or discounted deal ends, or are already on it.

Now Nationwide is reintroducing an SVR in the form of a “standard mortgage rate” (SMR) which offers no such rate guarantee and is being launched at 3.99%. Anyone who takes out one of the society’s mortgages will move on to the SMR when their deal ends.

“On a £200,000 interest-only mortgage, that margin means an extra £2,980 per annum. It could, however, give Nationwide an opportunity to improve the pricing on the deals they’re offering,” said Richard Morea at mortgage broker London & Country.

The society’s SMR is higher than some other lenders’ SVRs, including its rival the Halifax, where the rate is 3.5%. However, a number of other lenders have SVRs that are well above 4%.

Andy McQueen, mortgage director at Nationwide, said the mortgage market “has experienced fundamental changes due to the prevailing economic and market conditions. We are currently in a very low interest rate environment, which can be challenging when balancing the needs of both our savers and our borrowers”.

He added: “The new SMR will provide us with more pricing flexibility, something which is essential in helping us to offer our savers more attractive products in the future.”

Nationwide’s BMR is so low that some customers have asked to pay redemption fees to switch from more expensive fixed-rate deals on to the variable rate. However, the society has refused their requests.

The volume of mortgages that were approved for house purchase dropped by 7% in March,  suggesting that talk of a recovery in the UK market may be a little premature.

The British Bankers’ Association said its members had approved 26,097 loans for house purchases over the month, down from 28,024 in February.

The figure is slightly above the average of the previous six months, which stands at 23,152, but is 25% lower than March last year.

The drop could be a sign that the recovery in the housing market is not yetfull on, despite estate agents and surveyors reporting increased interest from would-be buyers.

The number of remortgages agreed by banks also fell from 28,237 to 26,831. Borrowers continued to stay on their lenders’ standard variable rate mortgages rather than switch to a new deal and pay arrangement fees etc.

Recent interest rate cuts have meant that many lenders’ SVRs are now lower than the deals they are offering new customers, particularly those who have less than 25% equity in their property.

All measures of banks’ mortgage lending were lower in March than in February, with the gross value of home loans advanced during the month dropping from £9.2bn to £8.9bn, and the net value of those loans, which takes into account repayments and redemptions, falling from £3.9bn to £3.7bn.

Gross mortgage lending for the month was 47.2% lower than in March last year, while the value of loans approved was 54.8% lower than 12 months ago at £7.3bn.

The BBA’s statistics director, David Dooks, said: “Lending to households continues to grow as banks make funds available for people who meet their lending criteria, but consumer confidence is fragile and unlikely to change demand markedly in the near-term.

“The banks’ figures also show it would be unrealistic to expect the mortgage market to recover in a steady and consistent way in the current economic environment.”

The first few months of 2009 has seen one of the largest ever changes in the take up of fixed rate mortgages according to a new monthly mortgage index from UK mortgage broker John Charcol.

The index shows a massive rise in the percentage of fixed rate mortgage applications from 29.1 per cent in December 2008, through 47.8 per cent in January and 67.4 per cent in February to 80.9% in March.

Ray Boulger of Charcol’s said, “The increase comes as a result of a combination of several factors, the most obvious being that with Bank Rate now at 0.5 per cent there is only one way for it to go – the only questions being the timing and the scale and speed of the increase.

“Another important factor is that the historically huge margins above Bank Rate now being charged by lenders for new tracker mortgages means that the risk of being locked into an expensive tracker mortgage when rates go up outweighs the fact that initially a fixed rate is a little more expensive. A third factor is that until recently there were no trackers available above 75 per cent LTV and so borrowers wanting more than 75 per cent couldn’t have a tracker even if they wanted one.”

In the first quarter of 2008, as Bank Rate fell towards 5 per cent and it looked as if it wouldn’t fall much further, the take up of fixed rates accelerated rapidly and in the second quarter stabilised at around 60 per cent. However, when by mid year further rate cuts looked on the cards fixed rate take up fell away sharply to 26.5 per cent in July and then fluctuated between 14.2 per cent and 23.4 per cent for the next 4 months, before starting to increase again following the Bank Rate cut to 2 per cent in December.

 Mortgage applications for Northern Rock have risen by 70% in March, the enhanced competitiveness of its product range with the average LTV of new lending is now just 48%.

The nationalised bank has published figures confirming gross mortgage lending for the first quarter was  £550m, with this representing mortgage completions in the period and not yet reflecting the impact of the planned increases in mortgage lending.Mortgage early redemption rates have slowed dramatically, and are running at around half the average rate of 2008.

The bank said its debt management strategies are beginning to pay off, with its stock of unsold repossessed properties falling from 3620 in December 2008 to 3200 at the end of March.

However, residential arrears over three months have increased from 2.92% to 3.67% in December. Northern Rock said it had noted tentative signs of improvement in early arrears trends, reflecting the investment in its debt management capability and improved affordability levels as a result of falling interest rates.

Gary Hoffman, chief executive at Northern Rock, said: “We are implementing our new business plan, which will enable us to move forward with our lending programme. The revised State aid application has been submitted and we are making good progress with the legal and capital restructuring of the business – which we expect to complete in the second half of the year. The economic environment remains difficult but our trading performance in the quarter was in line with our expectations and we saw some early signs of mortgage applications increasing in March, reflecting pricing adjustments to our current product range.”

The Chancellor Alistair Darling has said the government will act to help ease the mortgage crisis and UK banks will provide at least £20bn of mortgage finance this year.

He states he will introduce a scheme to guarantee securities backed by mortgages to ease the liquidity crisis.

He will extend a mortgage support scheme for owners out of work for a futher six months as long as they continue to look for a job.

He extended the 1% stamp duty holiday on homes of up to £175,000.

The ‘holiday’ was due to end this September, when the threshold at which buyers would have to pay the tax would fall back to £125,000. He said 60% of UK properties will be exempt from stamp duty.

Latest figures from the Council of Mortgage Lender show  gross mortgage lending up 16% in March to £11.5bn.

This however is still down  52% on March 2008, while gross lending for the quarter (£33bn) is down by almost 30% from the fourth quarter in 2008, and is the lowest quarterly total since the first quarter of 2001.The CML said a seasonal fall of 10% is typically experienced between the fourth and first quarter, and highlighted the first quarter results are broadly in line with its expectations for £145bn in gross lending this year.

Michael Coogan, director general of the CML, commented: “While the market is beginning to show some signs of stabilising, housing transactions and lending are set to remain low for the foreseeable future.

“Today’s Budget does provide the opportunity for action to reinforce the housing market. In particular we would like to see the Government extend and simplify low-cost home-ownership, raise the Stamp Duty threshold to £250,000, and expand existing support schemes for borrowers in difficulty

The Government’s Homeowner Mortgage Support Scheme has gone live today. The scheme which is an initiative which allows households at risk of repossession to defer up to 70% of the interest on their monthly mortgage payments for up to two years  although some lenders have opted to offer their own alternative schemes.

The initiative was given the required green light by Brussels under EU state aid rules on Monday. It is open to borrowers who bought their home before 1 December 2008, are owner-occupiers, and have an outstanding mortgage of less than £400,000 and savings of less than £16,000. Lenders offering the scheme will have the security of a Government guarantee if the borrower defaults.From today, the following major high street lenders will offer their customers the mortgage support: Lloyds Bank Group, Northern Rock, the Royal Bank of Scotland, Bradford and Bingley, Cumberland Building Society, and the National Australia Bank Group.

Specialist lenders and building societies, including Kensington and GMAC have also signed up, though Barclays, HSBC, Nationwide and Santander have all confirmed they will offer comparable arrangements to their customers, while opting not to take up the Government guarantee.

Michael Coogan, director general of the Council of Mortgage Lenders, commented: “Lenders are working strenuously to keep borrowers in their homes where they have a good prospect of being able to get back on track and sustain their home-ownership in the long term. The government is helping, through changes to Income Support for Mortgage Interest, the mortgage rescue scheme, and now the home-owner mortgage support scheme.

“Lenders fully recognise their responsibility to keep people in their homes where repossession can be avoided. The fact that some lenders are utilising the new scheme and others are not indicates simply a difference in their approach to forbearance, not in their commitment to it.”

A recent survey has showed that over a third of potential house buyers would like Alistair darling to suspend stamp duty on all properties in this week’s Budget.

They would also like then Chancellor to extend the current stamp duty holiday on homes costing up to £175,000 to include all properties until the housing market has totally recovered.

A further 18% of people said the threshold at which the tax kicks in should be permanently increased from £175,000 to at least £250,000 to help stimulate the housing market, according to FindaProperty.com.

Stamp duty is currently charged at 1% on homes costing between £175,000 and £250,000, rising to 3% on properties worth between £250,000 and £500,000 and 4% on homes costing more than £500,000.

Overall in the survey 58% of people thought some form of stamp duty reform would help them buy a home, while 30% said boosting mortgage availability would be most beneficial.

The majority of people said they would spend any money they saved on stamp duty on things relating to their new home, with 38% saying they would put it towards renovations and decorating, 24% would make additional mortgage repayments and 16% would put it towards moving costs.

A further 9% would use the money to pay off debt, 7% would save it and 2% would use it to fund other purchases such as a car or holiday.

Michael O’Flynn, content editor of FindaProperty.com, said: “Arguably suspending stamp duty could be more effective in stimulating consumer spending than the recent cut in VAT.

“House purchases tend to generate a lot of subsidiary spending on white goods, furnishings, decorating and building work and all of these would generate tax income for the Revenue.”

The CBI announced earlier that the worst of the UK recession was over but warned that there would be no recovery until April 2010.

They said that the recession worsened more quickly than expected in the first three months of 2009.

It expects the speed at which the economy is contracting to slow in the second half of this year.

However, the recovery is predicted to be “slow and fragile”, with growth in GDP beginning again in spring 2010.

The Ernst & Young ITEM club also predicted a recovery in spring 2010 but said that there would be a tough road ahead as unemployment is set to arise above three million.

The CBI expects the number of jobless people to peak at 3.25 million in 2010.

Peter Spencer, ITEM’s chief economic adviser, said: “Although one or two positive signs have started to appear, we face another12 to 18 months of serious grief.”

The forecasts emerged two days before the Budget, which is expected to include moves to slash public spending by £15 billion.

Alistair Darling, the Chancellor, is predicted to say that UK output will shrink by at least 3 per cent this year.

The CBI has revised its GDP growth predictions for 2009 from -3.3 per cent to -3.9 per cent to reflect the worse than expected contraction of -1.8 per cent for the first quarter of 2009.

It expects that aggressive monetary policy, a weaker pound, low inflation and fiscal support packages will combine to help the rate of UK GDP decline slow through 2009 and make a fragile improvement to reach quarter-on-quarter growth of 0.2 per cent in April to June 2010.

There is also some comfort in its prediction that the economy will have shrunk by a total of 5.1 per cent by the end of this recession, less than the cumulative 5.9 per cent seen in the early 1980s recession.

Yet the average UK consumer is expected to continue to cut back on spending, with household consumption forecast to drop by 3.4 per cent this year and 0.4 per cent in 2010 as low inflation and job worries keep average earnings growth weak throughout 2009.

The ITEM Club says that consumption will fall by almost 4 per cent as people become more concerned about savings.

The CBI expects businesses to cut down on investment in the face of the recession, with business investment predicted to shrink by 9.3 per cent in 2009 and a further 3.4 per cent in 2010.

Richard Lambert, the Director-General of the CBI, said: “The UK economy remains deeply troubled, and the first quarter of this year has been tougher than expected. Firms have been running down their stocks of completed goods, and that is having a real impact on output, jobs and investment. Anxious consumers are spending less and building a savings buffer.

“Given falling tax revenues, the shrinking economy and alarming levels of government debt, we urge the Chancellor to avoid any further major fiscal boosts in the Budget. Budget measures should be targeted on jobs and investment, with a focus on efficiency savings and public service reform.”

Vince Cable, the Liberal Democrat Treasury spokesman, said: “It is futile to get involved in a forecasting competition.

“All we can sensibly discuss is what is actually happening. That is unemployment growing rapidly, more and more families struggling to pay their mortgages, the growth of negative equity and an unrelenting budget deficit.

“We are undoubtedly in the middle of a major economic crisis, compounded by the reluctance of banks to lend.

“No amount of spinning by Government can avoid these simple, brutal economic facts which the Budget has to address.”