UK banks to reveal if cheaper mortgages are being passed on to customers

Some of the UK's major banks are poised to reveal if borrowers are reaping the benefits of lower as the lenders continue to navigate through uncertain economic times.

Lloyds Banking Group, Barclays, and NatWest are set to disclose their third-quarter financial results consecutively on Wednesday, Thursday, and Friday. The banking sector has remained robust in recent months, with borrowing costs beginning to decrease from their highs. "With the Bank of England delivering its first rate cut in July, investors will be keen to see how much of that has been passed on and whether it’s triggered any shifting behaviours from savers," commented Matt Britzman, senior equity analyst at Hargreaves Lansdown.

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Lloyds, which owns Halifax as well, has witnessed a dip in income after reporting substantial profits last year, while competition intensifies across the market for better mortgage and savings deals. In July, Lloyds reported a 10% year-on-year drop in net interest income – the profit made from loans minus what is paid out on savings.

On Wednesday, the bank is anticipated to announce a pre-tax profit of £1.6bn for the quarter spanning July to September, a decrease from the £1.9bn reported the previous year. According to Russ Mould, investment director at AJ Bell: "Thanks to the combination of competition, interest rate cuts from the Bank of England and political and public pressure, net interest margins and net interest income look to have peaked, and that is a key reason why analysts think the banks may struggle to grow earnings substantially from here onwards."

In contrast, Barclays is expected to report a slight increase in year-on-year earnings, with analysts predicting a pre-tax profit of around £2bn, up from £1.9m the previous year. Similarly, NatWest Group is forecast to report an operating pre-tax profit of £1.5bn, higher than the £1.3bn generated last year.

Gary Greenwood, a research analyst for Shore Capital Markets, expects the banks to report a "resilient" performance despite a backdrop of falling interest rates, geopolitical tensions affecting oil prices, and uncertainty ahead of the UK statement. Lending activity has shown "tentative signs of improvement", particularly in mortgage approvals for house purchases, due to decreasing borrowing costs.

However, Budget uncertainty has cast a shadow over the UK economy, causing some borrowers to pause. Greenwood expects activity to pick up again once Budget uncertainty has been lifted. Chancellor is set to present her inaugural Budget on October 30, with the Government pledging not to increase the primary taxes affecting "working people".