Q: Many building societies and smaller lenders will only consider lending on properties in certain areas of the country, why is this?
A: With so much emphasis on helping customers secure the right mortgage, it may come as a surprise to many applicants that lenders set lending restrictions on their portfolios.
There are various reasons why this happens and, although it may seem illogical at first glance, we’ve found that it can give reassurance – particularly to a local customer who’s making an application through a slightly smaller provider.
For us, it’s simple. These restrictions help us safeguard our members’ interests by staying firmly in control of our lending levels: our limits are guided by the regulator and set by our board.
Only 20% of our total lending, for example, should be on buy-to-let mortgages at any one time and we won’t usually consider buy-to-let properties that are situated outside our normal operating area.
That doesn’t mean to say we won’t lend nationally (our existing members can still borrow from us in England and Wales even when restrictions are in place), but Newbury Building Society’s branches are based in central and southern England.
That’s the region we regard as our ‘operating area’, and this adds something relatively intangible – but very valuable – to our offer: local customers know our brand in person, they can be fiercely loyal (which is useful to brokers), and they have greater confidence in our in-depth knowledge of the market and area that’s relevant to them.
With London just a short commute away, many customers may be surprised to find that we’ve chosen not to consider higher LTV arrangements on properties located there. We’ve built up a breadth and depth of awareness of our society here, and prefer to lend to those customers.
What would be the point in moving our risk footprint further afield, and encouraging the housing and economy of another area, prior to helping the growth of the towns we operate in?
Our strength is our personal, local service. We will look at lending arrangements for existing customers considering purchases in England and Wales, but Scotland has different land laws: it would make no sense at all for us to invest in the additional expertise we’d want to offer for that market, when there are local Scottish providers much ‘closer to home’.
We understand that restrictions can be frustrating. However, we like being in a position to give brokers the confidence to recommend a building society that understands its ‘home territory’ in great detail; that already has the local relationships in place to help a sale go smoothly, and is on hand to give their customers the personal service that can make such a difference during property transactions.
