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Secure Trust to halt new residential mortgages as housing market cools

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(Reuters) – Secure Trust Bank Plc <STBS.L> said on Wednesday that it would look to stop taking on new residential mortgages in the face of stiff competition and a cooling housing market in Britain.

“During the second half of 2018 market pressures and competition intensified as evidenced by increasing loan to value metrics and lower new net lending margins,” said the company, which plans to pause new originations until conditions improve.

The proposed changes at the bank’s mortgage business are not expected to have a material impact on 2018 and 2019 earnings, Secure Trust said.

The country’s housing market has been battered since Britain decided to leave the European Union in 2016, and that had also pressured mortgage prices, with tighter regulations on lending criteria pushing smaller lenders out of business.

Secure Trust said in August it had seen a drop in demand for loans to housebuilders as Britain prepared for its divorce from the European Union and wage growth slowed.

The company had also noted that lenders were competing on price and risk appetite to drive new residential mortgage business volumes, and it was tempering the growth of this part of the business.

Secure Trust said on Wednesday it continued to be selective on new lending keeping in mind the economic and political uncertainty.

British lawmakers defeated Prime Minister Theresa May’s Brexit deal on Tuesday, triggering political chaos that could lead to a disorderly exit from the EU or even to a reversal of the 2016 decision to leave.

Secure Trust, founded in 1952 in the English West Midlands, offers savings accounts and lends to individuals and businesses. Real estate finance accounts for 23 percent of its business, according to Refinitiv Eikon data.

Secure Trust, the former retail bank of Arbuthnot Banking Group PLC <ARBB.L>, has moved away from sub-prime lending and said on Wednesday it would offer a broader range of motor finance products to the prime end of the market.

(Reporting by Muvija M and Noor Zainab Hussain in Bengaluru; Editing by Shounak Dasgupta)

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