The mortgage price war and a new charge for mis-sold payment protection insurance (PPI) have helped wipe 40% off first-half profits at Britain’s biggest building society.

Nationwide, which has almost 16 million members, said its statutory profits fell to £309m during the six months to 30 September – down from £516m last time. The society said it had decided to prioritise investment in technology and other areas over “short-term profit”.

Stiff competition in the mortgage market and record low interest rates have been good news for many consumers but have squeezed lenders’ margins. Nationwide said the mortgage price war had pushed down its profits from new business.

Joe Garner, the chief executive, said that while the lender was still growing its mortgage, savings and current accounts business, “the pace of growth has moderated”. Nationwide claims that almost £1 in every £10 saved in the UK is deposited with it.

He also forecast no let-up in the tough competition “while the economic outlook remains uncertain”.

Like many of its banking rivals, Nationwide was hit by a last-minute surge in PPI complaints in the run-up to the 29 August deadline to submit claims. Its profits were hit by an extra £36m charge relating to PPI, which takes its total bill relating to the scandal to £473m.

However, Nationwide said it had been plagued by fake PPI claims and attempts by people to try their luck – it said the latest bill “includes costs to process a large number of inquiries received where no PPI had been held”.

The society added that it accounted for only 1% of all industry claims for PPI, so this was a much smaller issue than for many banks.

It is upgrading dozens of branches and creating two new “digital innovation hubs” in London and Swindon.

Garner said the building society’s members supported his pay package, which totalled £2.3m last year, and could reach £2.7m next year if all targets are hit.

He told Radio 4’s Today programme: “The board chooses to pay the senior executive of Nationwide less than our competition. Every year our members vote on our pay policy, and last year 91% voted in favour of it, including my pay.”

Nationwide said its chief executive’s maximum pay was typically about half of the FTSE 100 average for that position, and added that it was cutting the pension contributions paid to its executive directors from 33% to 16% of salary.