by Mark Johnston
Nationwide Grabs a Bigger Slice of Mortgage Market.
One of Britain’s biggest building society’s, Nationwide handed out around £800 million to its pre 2009 mortgage borrowers last year which was largely at the expense of many of its savers.
When the bank of England base rate was 5 per cent many lenders offered mortgages that would track the bank rate for the whole 25 year length of the loan.
Nationwide promised holders of its standard variable rate (SVR) loans, what it called Base Mortgage Rate (BMR) that they would never pay more than two percentage points above bank rate.
Therefore some of the building society’s mortgage customers, around 730,000 customers, have paid just 2.5 per cent since March 2009.
Though any mortgages taken since then now revert to the new standard mortgage rate which has a 3.99 per cent rate.
Executive director of the Nationwide building society, Chris Rhodes has repeatedly confirmed that the rate would be honoured indefinitely.
While this loyalty to borrowers maybe admirable it does come at a cost. Benefits elsewhere in the business are reduced in order to meet the annual £800 million cost of honouring the rate.
The good news though is that the society has a whole has navigated well throughout the financial turbulence of recent years.
A customer exodus from traditional banks has meant the Nationwide has been given a boost and therefore their shares of the mortgage market have grown to a record high.
It seems that dissatisfaction with the big banks has lead to people voting with their feet.
Graham Beale, chief executive of the building society, says “Nationwide is uniquely well placed to meet the demands of the growing number of customers who are seeking a genuine and variable alternative to the established banks”.
Gross mortgage lending has jumped 17 per cent to £21.5 billion thus giving the group its highest ever market share.
Recent figures have revealed that the building society provided 15.1 per cent of all UK mortgage lending and this figure is up from the 13 per cent recorded last year.
During the year Nationwide also provided loans to more than 42,000 first-time buyers, a 75 per cent rise on last year and meaning that the society was responsible for almost one in five of all first-time buyer mortgages in the UK.
In April this year the building society posted a 3.4 per cent rise in pre-tax profits to £210 million from £203 million last year.
The mutual has however shrugged off suggestions that it has benefited from the woes of its major rival the Co-operative bank, which just this month had its credit rating downgraded six notches by Moody’s, a credit rating agency, to effectively ‘junk’ status.
Nevertheless, in conclusion it appears that the Nationwide building society’s financial position remains strong and robust. This may be due to the fact that the lender has not simply focussed on new customers but it has reserved the very best deals for their existing customers.
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