British mortgage bank Northern Rock trimmed its 2007 profit forecast today, saying it was suffering from the number of customers on cheap fixed-rate mortgages at a time when interest rates are rising.
The low-cost mortgage specialist said it expected annual underlying attributable profit to rise around 15 per cent this year, compared with analysts' average forecast of 17 per cent growth to £430 million.
"As forward interest rates have moved higher, it takes time for new retail fixed rate mortgage prices to adjust upwards," Northern Rock said in a trading update.
It said the combined effect on net interest income of increases in Libor, swap rates, delays in retail repricing and the loss of interest from asset disposals was likely to be around £180 million to £200 million pounds this year.
However, it said this would be partially offset by net realised swap gains of around £40 million to £50 million pounds, and it would reprice fixed mortgage loans when they are renewed.
Northern Rock said its gross market share in the first five months of this year was running at around 10 per cent, above the level seen in 2006, and that its net market share of residential mortgage lending during the same period was around 19 per cent.