Speaking to Mortgage Solutions, Steve Fletcher, chief executive of Vernon Building Society, said the market was still “very tough”. Fletcher said big lenders needed to keep lending, but there was a lack of demand from consumers.
“You’ve seen some real quirks with lenders cutting fixed rates and then, the next week, the same lender is putting rates up,” he said.
The mutual’s finance director, Judith Aspin, has predicted that rates would stay where they are until around August, when they would start to fall.
Fletcher said that, because of this, Vernon Building Society did not “want to play this game where everyone is chasing rates down and trying to fight for a smaller part of the market.
“We’ve just sat back, bided our time and we’re not going in and out in price. We’re just looking for those quirky cases where we can help.”
UK Finance’s recent Household Finance Review suggested this year’s mortgage market would be “soft” and impacted by affordability challenges.
Fletcher said big lenders would be striving for business and “margins are going to be tight”.
He added: “We feel it’s probably a good time to either be big or be small, the businesses in between might find it hard as they’re neither one thing or the other.”
On 27 March, the mutual will celebrate its 100th year of business. Its most recent results revealed a 10.4 per cent growth in its mortgage book.
He said Vernon Building Society had repurposed its brand and wanted to identify its core values as being “personal, authentic, empowering and caring”.
First port of call for complex cases
Fletcher said Vernon Building Society wanted to be a broker’s “first port of call” for cases that were not straightforward.
He added: “Knowing that we won’t be able to do everything, but we will take that call, we will quickly deal with it and if it’s something we can help with, we’ll say yes and take the next steps.
“Importantly, for intermediaries, if it’s something we can’t do we won’t ask the broker to get involved and submit data or say we’ll have a look because that’s just wasting time for brokers.”
When asked if the increase in complex borrower circumstances would result in a boom in business, Fletcher said the mutual wanted to keep its growth sustainable.
“As a building society, what we can’t do is grow too fast. We have to grow at a pace we want rather than suddenly having 25 per cent growth then causing problems with liquidity. We’re aiming for steady year-on-year (YOY) growth of about 10 per cent per annum.
“In that, there will be some opportunities,” Fletcher said.
He also noted that each year brought its own difficulties.
“Over the last four years, we’ve gone into each year and said to the board ‘there are some challenges this year’. But each year that is like that probably makes the market easier for us as building societies because we only need a very small share in the market.
“There are a lot of customer situations that are not straightforward, and when that happens, we come to the fore,” Fletcher added.
Fletcher assured that the mutual’s business was not sub-prime and said there were “minimal arrears” on its book, adding it was taking things back to basics.
He said: “We’re back to what lending was always about, which is what’s the quality of the applicant and what’s the quality of the security underpinning this deal. If both of those are good, then we decide we should be able to do something with it.”
Fletcher said it made sense to have key relationships in Greater Manchester, as consumers in that area were already familiar with the brand. This is why the mutual has pledged to not close any of its branches and retained its in-branch mortgage advisers.
Otherwise, he said Vernon wanted to connect with brokers who specialised in its markets of focus.
“We only need a small market share to be able to do what we need to do. Our real goal is to build relationships with key brokers, networks and clubs – we realise we can’t build them with everybody,” he added.
Specialised markets
One of Vernon Building Society’s mainstays is self-build mortgages, and Fletcher said it made sense for the mutual to form relationships with broker specialists in this sector and holiday buy to let (BTL).
He said it preferred to work with brokers who specialised in self-build because they would assist people in getting an understanding of the limitations and pitfalls of this kind of development.
“It’s something people think would be nice to do, so there is demand, but then customers get into the detail of it and realise it’s not as easy as they thought,” Fletcher added.
As for holiday let properties, Fletcher said the mutual focused on properties that were also suitable to live in rather than “strange” accommodations.
Fletcher said the lender tended to “stick to our knitting” and currently had no plans to enter into new markets.
“We don’t compete with the big boys and on the lenders in terms of we can’t compete on rates, and we don’t want to compete on rates, so we compete on different types of quirky situations,” Fletcher said.
He said that, in the last couple of years, most of Vernon’s business was sub-80 per cent residential mortgages.
Fletcher added: “You’d look there and think ‘that’s straightforward’ and it is on the face of it. But we do things where people struggle to prove affordability, so they might be cash-rich and income-poor. We look at newly qualified people in professional roles who are not yet being paid what they need for affordability but will be. Self-employed where their accounts might have gone off for a year but in actual fact they’ve got a really nice business.”
