© Reuters The Nationwide Building Society is owned by customers

Britain's biggest building society has reported its first fall in half-year profits since 2012 as it counted the cost of low interest rates.

Nationwide reported a pre-tax profit of £696m for the six months to the end of September, 13% lower than the same period last year.

It comes a day after the Co-operative Bank also acknowledged the impact of prolonged low interest rates as it announced plans to cut 200 jobs.

The policy of near-zero rates has come under increasing scrutiny in recent days and Bank of England officals have been seeking to defend themselves against the criticism.

Nationwide's half-year results boasted a 17% rise in prime gross mortgage lending to £17.5bn while the number of current accounts climbed 36% to 377,000.

It said the fall in its profits was in line with expectations.

Finance director Mark Rennison said it "reflects continued margin pressure due to the prevailing low interest rate environment and the conscious decisions we have taken over recent years to support our members".

They were squeezed as it decided not to pass on interest rate cuts to some of its savings accounts while margins on mortgages were also hit due to the low-rate environment.

The Bank of England cut interest rates to 0.5% in 2009 to try to help the economy recover from the financial crisis and they were cut further in August to 0.25% to cushion an expected Brexit blow.

Lenders find it harder to make money when the rates it can charge borrowers are lower.

Theresa May told the Conservative Party conference earlier this year that low interest rate policy has had some "bad side-effects" including a squeeze on savers.

She also said they had enriched people who owned assets - such as houses or shares - as their values increased while those without had had grown poorer.

But Bank of England governor Mark Carney this week turned his fire on politicians who attack central banks, accusing them of "massive blame deflection".

Deputy governor Ben Broadbent backed up the argument in a speech on Friday addressing the concerns about the effect of low rates and money-printing "quantitative easing".

He said the evidence did not support the view that this was widening income inequality.