Profits fall at Nationwide

Pre-tax profits for the six months to the end of September were £143m, down 62% on the £374m reported a year ago.

Bad debt charges on commercial property loans rose to £180m, from £146m in the previous six months and £25m in the same period last year.

The proportion of mortgage accounts three months or more in arrears with payments by the end of September was little changed from the previous six months, at 0.66%.

The average loan-to-value rate for new residential mortgages was 63%, little changed from the 60% of the previous six months.

Graham Beale, chief executive of Nationwide, said it expected the remainder of 2009 and 2010 to present a very difficult trading environment.

The building society has also forecasted a slow recovery for the UK economy and the housing market from recession.

Rising unemployment would "inevitably" push house prices downwards in 2010 and interest rates would probably remain at their record low of 0.5% until "at least Q4 2010", the society said.

Beale said: "The growth in house prices over recent months appears to be driven by lack of supply, and growth in unemployment throughout 2010 will inevitably exert downward pressure on house prices."