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Holmesdale blames mortgage market competition for Skipton merger

  • 28/02/2018
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Holmesdale blames mortgage market competition for Skipton merger
Skipton and Holmesdale Building Societies have announced plans to merge with the two boards agreeing heads of terms on the arrangement.

Holmesdale Building Society said the need to merge had been driven by the competitive mortgage market and that its members would likely see improved borrowing rates as a result.

Subject to approval by its members and confirmation by the Prudential Regulation Authority (PRA), the mutuals expect the merger to become effective on 1 October 2018.

The plans were unveiled alongside Skipton’s annual results which showed gross mortgage lending increasing by 12.8% to £4.5bn, from £4.0bn in 2016 – leapfrogging Leeds Building Society.

Skipton is the UK’s fourth largest building society with more than 919,000 customers, 87 branches, £21bn of assets and a mortgage balance of £16.8bn, up £1.3bn from 2016.

Meanwhile, Holmesdale was founded in 1855, has one branch in Reigate, Surrey, and employs 26 people.

It has more than 7,300 customers, £185m of assets and made an operating profit of £1.5m for the financial year ended 31 March 2017.


Lower SVR

In a Q&A posted on its website about the proposed merger, Holmesdale said one of the advantages of the move was an expected improvement in savings and borrowing rates for its members, with a pledge that these will not worsen as a result of the merger.

“Following the proposed merger, Holmesdale owner-occupied residential borrowers paying the Society’s current standard variable rate (SVR) of 4.99% should benefit from moving to Skipton’s prevailing mortgage variable rate (MVR) of 4.74%, if they pay by direct debit,” it said.

However, it added that there is no guarantee of what the Holmesdale SVR and the Skipton MVR will move up to on the date of merger or what the MVR of the Skipton will be after the merger.


Redundancy process

Skipton has committed to retaining a branch in Reigate for at least two years from the date of merger, after which it will be subject to its ongoing branch review process.

Holmesdale members will be able to transact in any branch of the enlarged society from the merger date.

A statement from Holmesdale said there will be no compulsory redundancies among designated branch staff as a result of the merger.

However, the Holmesdale Q&A added: “The head office and administrative functions of the Holmesdale will move to Skipton’s head office and employees of the Holmesdale who undertake administrative and head office functions will be included in a redundancy process.”


Tough mortgage market

The final deal will have to be approved in a vote by Holmesdale members.

Holmesdale said that it was competing in an increasingly tough mortgage market and an operating environment which continued to drive up costs.

“Following a fundamental review of the current commercial and financial position, Holmesdale’s board has unanimously concluded that it is in the best interests of current and future members to merge with a much stronger building society able to offer more choice and value to members in the long-term,” it said.

Holmesdale Building Society chief executive Mike Kirsch said: “Without the merger we would not be able to continue to provide the same range of products or good value pricing to our members.

“A merger with Skipton will result in Holmesdale members having access to Skipton’s large national branch network, its online, post, telephone and financial advice offering, and to a broader range of attractive products and services – from the time when the merger becomes effective,” he added.

Skipton Building Society group chief executive David Cutter said: “We have always made it clear that we would consider further merger activity where it is in the best interests of our members. We look forward to welcoming Holmesdale members on board and sharing with them our full range of financial solutions to help them plan for their life ahead.”


Skipton results

As part of its results, Skipton announced that in 2017 it helped 25,979 homeowners, up from 23,666, to purchase or remortgage their properties.

This included 4,540 first-time buyers, up from 4,327, and 1,498 through the Help to Buy equity loan scheme, up from 1,292.

It added that £824.1m, or 18.4%, of the group’s gross lending during the year was on buy-to-let mortgages, up notably from £588.0m in 2016.

However, a charge of £11.4m was included in the group’s results for commission clawbacks in the Connells group as a result of an increase in the volume of business written during the year.

Charges of £5.7m were also allocated for customer compensation provisions relating predominantly to provisions for potential claims on payment protection insurance.

This also included potential future redress payable for a small number of mortgages mainly within its now closed specialist mortgage lenders Amber Homeloans and North Yorkshire Mortgages.

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