Principality Building Society profits up to £28.7m

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Media captionThe Principality says it is still careful about who it lends to

The Principality Building Society is reporting growth in its profits and mortgage lending in its annual results.

Pre-tax profits were up £3m to £28.7m, a rise of nearly 12% compared to last year.

There was increased overall mortgage lending, up by 10.7%, which takes it to an all-time high of £1.1bn.

The Cardiff-based outfit says it remains prudent about who it lends to, but some are concerned about the housing market becoming over-inflated.

The Principality is the largest building society in Wales and the 6th biggest UK-wide.

"Two years ago we set out to grow the business," said chief executive Graeme Yorston.

"This is the second year lending has grown and that helps people buy their own homes and that's clearly an important part of what we're here to do.

"Alongside that, we've managed to grow our profits as well. So all in all... a pretty successful year."

As a building society, the Principality is owned by its customers.

It says that drives its decisions in balancing the deals it provides to its savers and those for its mortgage holders.

Mr Yorston said it was following a prudent and sensible growth strategy that was in keeping with its 153-year history of avoiding excessive risk.

However, the Principality has reintroduced 95% mortgages for some borrowers.

'More accessible'

It said it helped boost the housing market by allowing first-time buyers to purchase homes without large deposits.

Joanne Powell, 29, a community support officer with Gwent Police, is moving out of her parents' home for the first time after agreeing a 95% mortgage with the Principality.

"Mortgages are more accessible," she said.

"With the 5% deposits that are now available, obviously it means I can afford to buy a home and furnish it.

"If the deposits were as high as they used to be, then I wouldn't be able to afford the deposit let alone furnish the home."

The UK and Welsh governments have encouraged banks and building societies to lend more through their Help to Buy schemes, which offer taxpayers' money to support borrowers who have a 5% deposit.

Additionally, the Bank of England had used its Funding for Lending scheme to encourage financial institutions to increase mortgage lending.

This has now been refocused away from mortgages towards helping businesses amid worries about the housing market overheating.

Steve Williams, a mortgage expert from the price comparison website, said: "The Help to Buy scheme has certainly increased the amount of 95% mortgage rates available on the market - as the government-backed banks have offered 95% deals, other have followed suit."

'Responsible lender'

Critics argue that easy access to credit and unsustainably high house prices played a major part in the economic crisis.

Mr Yorston said first-time buyers played an important part in stimulating the housing market - and 95% mortgages were needed to help them.

"I do understand the concerns that people have around the high percentage of lending but as a responsible lender it's really important to us that we make sure we assess people's ability to pay the mortgage," he said.

"We rigorously assess people's ability to pay the mortgage not only now but actually when interest rates begin to rise."

The Bank of England has said it will consider increasing interest rates when the UK unemployment rate falls to 7%.

The latest figures from January show UK unemployment is at 7.1% while the rate in Wales is 7.2%.

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