NATIONWIDE, the UK's biggest building society, has more than doubled its quarterly profits in spite of a sharp drop in lending following the introduction of tougher rules on mortgages.

The mutual said its underlying profits soared to £263 million in the three months to the end of June, while statutory profits rose 141 per cent to £253m.

Gross mortgage lending fell to £5.8 billion, down from £6.4bn in the first three months of the year and net lending dropped from £2.6bn to £1.7bn.

The group, which issues one in six of the UK's new first-time buyer mortgages, said the advent of the Mortgage Market Review rules in April had sparked a "period of adjustment for the industry".

The new regime from the Financial Conduct Authority requires lenders to carry out more stringent background checks on prospective homeowners before deciding whether they can afford to keep up payments on a mortgage.

According to the Council of Mortgage Lenders, gross mortgage lending in the UK rose 10 per cent during the second quarter, though the pace of growth had slowed.

Nationwide's finance director Mark Rennison said the "evidence has continued to build" for a slight slowing in the UK housing market since the start of the year, following an 8.4 per cent rise in prices and more than a million transactions during 2013.

"We do think we have a seen a degree of cooling in recent months," he added. However, he added that the chronic undersupply of housing in the UK meant that prices are likely to remain high for some time.

His comments followed a report from Rightmove yesterday that said asking prices fell 2.9 per cent between July and August, led by a six per cent slump in London.

The number of troubled mortgages on Nationwide's books has fallen slightly in the quarter. Just 0.58 per cent of loans were more than three months in arrears, down from 0.63 per cent a year ago.

Nationwide also reported progress in its efforts to capture more of the current account market. The mutual said it now has 6.4 per cent of the country's current accounts, up from 6.2 per cent in April as it opened more than 110,000 new accounts.

The group said it attracted 10 per cent of all customers switching accounts in the period.

Almost 289,000 people across the UK switched their main current account during the quarter, following the introduction of a seven-day switching guarantee last year, according to the Payments Council.

Nationwide's members deposited £1.5bn more in their accounts in the period, taking its total deposits up to £132bn.

The group has not needed to set aside extra money in the quarter for customer redress, unlike rival banks which recently made multi-billion pound provisions for mis-selling payment protection insurance and other products.

Nationwide also credited its strong performance to a move away from commercial property, which helped to reduce impairment charges in the quarter.

The group now has a core capital ratio of 16.3 per cent and leverage ratio of 3.7 per cent, putting it even further ahead of the targets set by the Prudential Regulation Authority.

Nationwide integrated the remaining branches from Dunfermline over a single weekend in June. The group announced the merger, with the closure of 25 branches, last October.

"We look forward to further cementing our presence in Scotland as we continue to invest in Caledonia House, the former headquarters of the Dunfermline Building Society, and our branch network throughout Scotland," said Larry Banda, branch network divisional director.