Why the mutual sector is firmly on the front foot

Last month I attended the Building Societies Association Conference in Harrogate and the event itself went a long way to explaining why the mutual sector has not just survived the recent financial upheavals in both the world and UK economies but is now firmly on the front foot.

Patrick Bamford
5th June 2015
patrick bamford genworth

Indeed, in terms of what it means to the overall mortgage market the recent statistics from the BSA show how important societies are in delivering mortgages to the marketplace.

The latest results for quarter one this year showed that the mutual sector lent £12.7bn, giving them an overall market share of 28.5%; this is a year-on-year increase from the 25.9% in the same quarter in 2014, and up from 26% in quarter 4. A sizeable 2.5% increase in one three-month period is not to be sniffed at and shows building societies’ continuing appetite to lend and the popularity of their propositions, in terms of both product and service. At this rate, we will not have long to wait before mutuals account for a third of all lending.

Plus we should not forget the importance of mutuals in bringing new lending to the market – the sector accounted for 29% of all new loans during the first quarter of the year and certainly appears to show a sector at ease with itself and one incredibly active in many mortgage sectors, not just the mainstream residential offering.

As a business that works very closely with many building societies we are only too acutely aware of the drive and ambition within societies to expand their offerings and to ensure they are able to offer loans to a variety of customers. We have stated many times how vitally important societies have been in keeping the home-owning dream alive for first-time buyers and those in need of high LTV mortgages. Again, without a number of building societies who have led the way in the provision of low-deposit/equity loans, we would be looking at an even more difficult lending landscape for those who want to own/refinance their homes.

One might even say that the mutual sector pre-Help to Buy single-handedly kept the high LTV market going because, for many of the bigger banks, there was little inclination to offer such mortgages before the incentive of HTB was offered to them. Even through this HTB period the societies have not shied away from their responsibilities in this area, even though the terms of the scheme pretty much made it impossible for them to join.

Instead, they have found the ways and means – either through their take-up of private mortgage insurance or an ability to carry the burden on their own – to continue offering such loans. This has given societies – certainly the ones we work with – the confidence and flexibility to innovate in this part of the marketplace and to tailor their offerings to specific borrower groupings. It also means that, regardless of what happens with HTB2 (and we sincerely hope it continues in the guise of a private mortgage insurance initiative) societies will be able to maintain their presence in the high LTV mortgage marketplace for some time to come.

Not only this but we are now starting to see societies offering remortgage and product transfer options for those who have taken out Help to Buy mortgages. This trend is likely to continue and we may well see a move from those lenders within the scheme to societies working beyond its borders. It is another example of societies being at the forefront of development and understanding the changing needs of borrowers particularly those who have secured a loan through Help to Buy.

This is exactly what is needed from the mutual sector – a deep understanding of the market and how it needs to adapt going forward. Our work with our society clients certainly shows their intention and commitment to helping borrowers in all areas of the market and we feel particularly confident that the development of the mutual sector will be pushing the UK mortgage envelope for many years to come.

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