Guest blog - Colin Fyfe of Darlington Building Society on the success of mutuals
Colin Fyfe, Chief Executive, Darlington Building Society
A revolution in local mortgage lending is almost complete. For years, since the beginning of the recession in 2008, housing finance has been subject to scarcity, then scrutiny and has now recovered in a way that ensures viable home purchases can be completed with relative ease. Building societies have been at the heart of the change and in Darlington my team has been working to ensure the survival of our local building society which is now blossoming and thriving at the heart of the recovering local housing market.
The key to our turnaround has been a returning to the core-reason we were first created; to lend to local people in order to secure them a home of their own. In doing so we have rejected many of the tempting side-lines that were leading the financial sector astray before the crash, prioritised substantial investments in people and technology and made a commitment to staying a mutually owned local organisation.
Mutual status gives the building society the independence and flexibility to operate in a way our members, both savers and borrowers, want. We are typical of the way the mutual sector has grown as a result of a change in attitude since the financial crisis. In the first half of 2015, according to data from the Building Societies Association, mutual building societies lent £26.4 billion of gross new mortgages, approving 189,000 mortgages. Throughout the UK mortgage approvals are up, mortgages balances remain steady and building societies accounted for over half of net lending, against a natural market share of 20%.
We can process applications quickly as a result of combining the instincts of our lending managers with technology which is delivering more efficient services. As a result, unlike large banks for whom the phrase ‘computer says no’ is beyond satire, we can take local based decisions on mortgage applications which regularly see us offer young people access to funding based on 95% loan to value to purchase their first home.
As well as supporting first-time buyers, the building society sector continues to service the whole spectrum of borrowers, including people requiring a mortgage that lasts into retirement.
The current discussion about interest rates is causing people to consider rushing to apply for fixed mortgages or to re-mortgage. My view is that we have a long period of stability ahead and any moves on interest rates will affect the amounts repaid by borrowers by very little in the medium term. Decisions on your mortgage should be taken against the assessment of long term affordability not short term interest rates. On this issue borrowers with mutual building societies tend to get their sums right – helped in no small part by the guidance and support of the lender. This is borne out by the data on repossessions, which is much better for borrowers with mutual building societies.
UK claims for repossession peaked in 2008 at nearly 143,000, but latest figures suggest that has fallen to under 50,000. Less than 1.7% of mortgages were in arrears to building societies but considerably more with banks. The total number of mortgages in arrears peaked in 2009 when nearly 10% of all UK mortgages had arrears of more than 1.5% of balances.
Keeping up with monthly mortgage repayments is becoming less of a problem for people wanting to buy a home. Data from the BSA Property Tracker suggests just one third (33%) of consumers think that this monthly commitment is a barrier to buying a property – again the lowest since 2009. Affordability has improved since last year when monthly mortgage repayments were thought to be a barrier for almost half (49%) of consumers. Lack of job security has also fallen as a barrier, whilst raising a deposit – the biggest challenge - remains steady (59%). One of the biggest drivers of the housing market is the economic outlook, given that it is improving it is no surprise that over half (56%) of people also think house prices will rise over the coming year. Only 12% said they didn’t think now was a good time to buy a property – the lowest on record since Property Tracker began in 2008.
Against the backdrop of improving market conditions and the internal restructuring an investment of Darlington Building Society, we are ready to make a further commitment to the branches on the high street. At a time when banks are closing branches we are refurbishing and investing on ours. Throughout the area, 10 high street branches of Darlington Building Society will all look different from this month. We have a new look, backed up by new levels of service serving a growing number of new members. All of this will be supported by new online services which will be implemented in stages over the next 12 months.
This is a good time for a modern and mutual financial institution; we will be 160 years old next year but we are very much part of the future of our local communities.