Do you expect to see other mutuals ever join Nationwide in the gross lending/market share top five and if so, how long will it take?
Contributing to this week’s Market Watch are:
Brian Murphy, head of lending at Mortgage Advice Bureau (MAB)
Chris Smith, direct mortgage manager at Yorkshire Building Society
Rachel Springall, spokesperson at Moneyfacts
Brian Murphy, head of lending at Mortgage Advice Bureau (MAB)
The data provided by the Council of Mortgage Lenders showed that eight of the top 20 mortgage lenders in the UK are mutuals so I would not rule out one of them eventually joining Nationwide in the top five. However, when and how this will happen remains to be seen.
Yorkshire Building Society is the second largest mutual in the UK and has grown its market share via prudent lending but also via acquisition merging with Barnsley, Chelsea and Norwich & Peterborough Building Societies.
Coventry Building Society has also pursed this strategy to a certain extent as well as one of looking for opportunities in niche product areas such as equity release.
Looking outside these traditional mutuals we also need to consider how the sector is evolving, with the rise of the ‘super-mutual’ as the tie-up between Co-operative Banking Group and Britannia Building Society has been called, and Kent Reliance Building Society which has gained funding from JC Flowers.
But any challenge for one of the top five spots from a mutual will depend not just on their appetite for lending but also the strategies that the banks decide to pursue. We may find that some banks decide to focus on other aspects of their core business in the future, thus leaving the door open for a mutual to break into the top five.
Chris Smith, direct mortgage manager at Yorkshire Building Society
In an ideal world you would want to see more mutuals challenging for a position in the top five lenders.
Customers appreciate the mutual model and the financially secure approach we take. But at the same time, it would be risky for mutuals to go out of their way to target a bigger market share and potentially undermine what makes them so strong.
The Co-Op’s potential expansion of its branch network obviously creates another big mutual but otherwise the league table will probably stay stable.
At Yorkshire Building Society we have an ambition to grow our membership and lend to more potential members which means our position in the CML table may well continue to rise.
But for us, and any mutual which puts reliability and the trust of members at the top of its priorities, growth will not come at the expense of our values.
Borrowers do not choose a mortgage provider solely because it is the biggest lender, they want high quality service, a convenient application process and a responsible approach to lending. That is what makes mutuals attractive to so many homeowners and why we would not replicate the model used by banks.
Rachel Springall, spokesperson at Moneyfacts
Nationwide Building Society lent £17.1bn last year, so it has a reasonably large customer base giving it a decent market presence.
The fact that it has three separate mutuals running under its banking licence, Cheshire, Derbyshire and Dunfermline Building Society, means that it will lend substantially more than mutuals that do not have a great reach.
Societies with several brands under their banking licence will have greater exposure with more scope for a higher number of customers and high street branch presence. Larger mutuals may offer lower rates and incentives due to larger budgets than the smaller mutuals, as well as many more branches.
Out of the top twenty mortgage lenders last year, eight were mutuals, including Skipton, Leeds, Principality and Nottingham Building Society.
Showing signs that mutuals are increasing their competition to offer some of the best rates (Chelsea Building Society offered the lowest five-year fixed rate we ever recorded at 3.19%, surpassed by NatWest Intermediary Solutions at 2.95%), it will be interesting to see whether they can close the gap between them and the banks over the next financial year.
