OSB Group has lowered its full-year margin and return expectations after competition for retail deposits pushed up funding costs, despite a 10% increase in mortgage originations.

The specialist lender now expects a net interest margin of between 215 and 220 basis points in 2026, based on what it described as a conservative assumption that pressure on retail funding costs will not ease.

Return on tangible equity is forecast to be about 12.5%, excluding costs associated with the appointment of its incoming chief executive. OSB also warned that a continuation of current funding pressures could have a modest effect on its aspiration to deliver a mid-teens return in 2027.

Profit before tax fell to £187.2m in the six months to June 30, from £192.3m a year earlier. Higher impairment charges and administrative expenses outweighed an increase in net interest income and a lower fair-value loss on financial instruments.

The net loan book grew by 1.3% to £26.3bn, compared with £25.9bn at the end of December. Originations rose by 10% to £2.3bn, while retail deposits increased by 3% to £25bn.

Andy Golding, group chief executive, said: “The Group delivered a resilient financial and operational performance in the first half of 2026 against a volatile macroeconomic backdrop.

“Our buy-to-let and residential franchises performed well in the period. Originations grew moderately in our higher-yielding sub-segments compared to the prior period, despite macroeconomic uncertainty and elevated mortgage rates.”

The company continues to expect administrative expenses of about £280m this year, excluding costs related to the incoming chief executive. Its guidance for net loan book growth remains unchanged.

BUY-TO-LET ACTIVITY INCREASES

OSB’s buy-to-let originations reached £1,028m, up by 10% from £935m in the first half of 2025. Its Rely brand now serves all new buy-to-let borrowers.

The lender said it had been able to respond quickly to swap-rate volatility and maintain margins when some competitors withdrew products.

UK Finance figures cited by OSB showed that gross new buy-to-let lending increased by 14% to £17.8bn during the first five months of the year, from £15.6bn in the same period of 2025.

OSB said it was the UK’s largest independent buy-to-let lender by gross new lending in 2025, with a market share of 4.3%.

Combined originations across its higher-yielding lending segments increased to £892m, from £884m a year earlier. The company said some borrowers had delayed financing decisions because of economic uncertainty and elevated mortgage rates.

Interbay Asset Finance was also accredited by the British Business Bank to provide loans through the Growth Guarantee Scheme, allowing it to finance a wider range of assets.

PLATFORM MIGRATION CONTINUES

OSB has soft-launched residential mortgage products on its new lending platform with a small group of brokers. Feedback will be used to refine the system before a full market launch later this year.

Golding (pictured) said: “The transformation programme continued at pace and I am pleased that we have soft launched Residential products on the new lending platform and our savings migration is progressing well.”

The group said it remained confident of meeting its longer-term aspirations for 2028 – 2029, supported by the run-off of its back book, changes to its minimum requirement for own funds and eligible liabilities, greater loan book diversification and benefits from its transformation programme.

GOLDING PREPARES TO STEP DOWN

Golding will retire as chief executive and a board director on 31 August after 14 years with the business. Enrique Alvarez Labiano will take over both roles on 1 September.

Golding said: “I wish him every success as he takes the business forward.”

David Weymouth, chair of the board, said: “I and the whole OSB Group Board would like to acknowledge and thank Andy for his significant contribution to growing OSB into the UK’s largest specialist lender over the last 14 years.

The Group’s success was driven by his strong leadership, strategic vision and focus on growing deposits and broadening the Group’s lending profile.

“He has delivered substantial shareholder value and shareholder returns of over £1.3bn since 2019. We all wish him well in his future endeavours.”