Residential mortgage lending

The vast majority of our lending portfolio consists of UK residential mortgage loans to individuals. Our policy is for all residential mortgage loans to individuals to be fully secured first priority loans.

We are the second largest residential mortgage lender in the UK following our merger with Portman Building Society which took effect on 28 August 2007. We have a national franchise within the UK, with a concentration of lending in south-east England, including London. At 30 September 2007 the prime mortgage lending portfolio was £104 billion.

We offer a wide range of fixed and variable rate mortgages that are typically for terms of twenty-five years. However, the average term of our residential mortgages is typically between five and seven years because of the high level of early redemptions typical in the UK residential mortgage market. Some of our products offer additional incentives such as cashback payments and property survey fee reimbursement. To reduce the costs associated with early repayment of mortgages and to recover a portion of the costs of mortgage incentives, we impose early repayment charges on some products.

The high asset quality of our UK residential mortgage lending has been sustained through our continued low risk lending strategy. The overall proportion of mortgages 3 months+ in arrears as at 30 September 2007 for prime mortgage business was 0.31%, compared to the industry average of 1.06%.

We also provide specialist lending through UCB Home Loans and The Mortgage Works, including Self-Certified and Buy to Let mortgages.

As at 30 September 2007 the specialist lending portfolio had total mortgage balances of £12.5bn. Mortgages 3 months+ in arrears as at 30 September 2007 was 0.98%, compared to the industry average for all mortgage lending of 1.06%.