You are here: Home - News -

BROKER VIEW

by:
  • 14/03/2002
  • 0
Nationwide may have won the moral battle of dual pricing, but where does the market go from here? asks Alan Mudd

This week, the UK’s largest building society and one of the country’s largest lenders took the unexpected step of abolishing the higher of its two standard variable mortgage rates.

In a move brought about by a recent Financial Ombuds- man (FO) ruling, Nationwide will move around 400,000 borrowers onto its new, lower standard variable rate on 1 April, resulting in a £250 cheque for an average £50,000 mortgage borrower.

‘Dual pricing’ has been the thorniest issue facing mortgage lenders this year. Nationwide’s move follows Halifax’s decision to abolish the lower of its two SVR mortgages in response to a successful claim brought by one of its borrowers.

Nationwide’s move means its new SVR of 4.74% will apply to all existing borrowers ‘ a move estimated to cost the society £90m. While Nationwide’s move has to be applauded for the benefits it will pass to borrowers, the move is likely to have serious repercussions throughout the mortgage market.

Major banks and other lenders have dismissed Nationwide’s decision as a PR stunt to claim what moral high ground remains. These lenders have countered the move by claiming the new business rates they offer significantly undercut Nationwide’s standard rate. Discounted rates are typically 1% to 1.25% below Nationwide’s new SVR with the option of remortgaging when discount period expires. On an average 25-year £50,000 mortgage this equates to a saving in excess of £30 a month.

Although the move benefits those customers sitting idly on Nationwide’s SVR these are the very customers who should consider remortgage schemes available from other lenders.

Nationwide has taken the honest stance and retrospectively agreed to reimburse those clients who have been treated ‘unfairly’ by their dual pricing policy. Other lenders are dealing with queries on an individual basis, with thousands of cases being reviewed.

While Nationwide is to be applauded for its honesty, it remains to be seen how it can offer competitively priced mortgage products going forward, with so many borrowers paying less interest. Nationwide claims there will be no direct impact on savers, which begs the question where this £90m will come from. The answer is to remove aggressive new business rates, which are likely to play into the hands of major competitors. At this stage, an eight-figure sum seems a high price to pay for the principled stance.

Alan Mudd is associate director of Savills Private Finance


Tags

There are 0 Comment(s)

You may also be interested in

Business Skills

In this section, we offer short ‘how to’ guides on harder to crack areas of business. From social media, to regulation or niche product areas, we cover it all.

Profiles

Our journalists interview key industry entrepreneurs, strategists and commentators for day-to-day market insight and a strategic view of where the industry is heading. We offer lessons for success and explore the opportunities for your business

Success in Practice

Here, we share case studies fleshing out best practice to help you decide what could work for your business. Take a look at how others approached complex tasks like launching a new mortgage lender, advising on a new product area or deciding to specialise in another. Learn from others mistakes and triumphs.

Marketwatch

Each week, we ask top mortgage and property commentators with a unique perspective to examine a key news headline, market move or regulatory or political issue.

Poll

Vote in our weekly poll here. It’s your chance to tell us what you think and be heard on the top news stories of the week. Review our archive to find out what your industry really thinks and all our coverage of the results.

Top Comments

Be part of the conversation on Mortgage Solutions. We want to hear from you. We have a tool called Disqus to tell us which stories get the most comments each week. Every Friday, the team picks the most thoughtful or opinionated contributions from our readers to enjoy again. Don’t forget to share your favourite stories from the site on social media to keep the conversation going.
Read previous post:
As easy as…

With so much jargon used in the non-conforming market, brokers will need to give borrowers guidance to help them through...

Close