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Ord
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Location: London
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 Posted: Sat Jan 23, 2010 1:33 pm Post subject: |
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| MarkyMarkD wrote: |
As for Ord's "Nationwide sticks to its more expensive promise" I think that's because it wasn't hedged as being "not in exceptional circumstances".
You can bet your bottom dollar that (a) Skipton got FSA approval up-front for this change, and hence nobody's going to successfully challenge it and (b) Nationwide can't do the same because it would breach the terms of their customers' deals. |
So is Nationwide nobbled for the next decade  ?
Is there no society able to mop up the detritus from the rest of the sector that will appear in the next two years?
It rather defeats the BSA's case to the government ( on banks being helped when BSs are not ) when so much of the damage to the mutual sector has been stupidly self-inflicted. |
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MarkyMarkD
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| Posted: Sat Jan 23, 2010 6:08 pm Post subject: |
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| HB wrote: | | MarkyMarkD wrote: | | HB's "provide some rates which are attractive then" is stupid. How can a provider pay attractive savings rates when its HIGHEST mortgage rate is 3.5% and it is making less than that on any discounted mortgages, trackers or fixed rates. |
Rubbish.
It will also have a good number who have fixed mortgages at rates way above the current rate. And there will always be loads of savers money in societies at rates below 1%.
If a society needs funds it must attract them at good rates. My point stands. |
No. Their fixed rate mortgages will be swapped out to LIBOR which is currently around 0.60%. Lots of margin to pay good savings rates out of that - NOT!
Combine earning 0.60% on all the fixed rates (plus any margin between the product rate and the swap rate - typically not a lot, in fact), earning 3.50% on SVR and far less on trackers and discounts, and the average rate Skipton were earning would be in the 2-3% range. Take off their operating costs - in excess of 1% of balances - and what on earth is left to pay savings rates out of?
I know that they will have SOME accounts paying sub 1%, but they doubtless also have lots paying more than their average income.
"If a Society needs funds it must attract them at good rates". Yes, but those good rates are quite likely very significantly higher than their average income, and therefore getting those savings in, reduces margins still further from their present dismal levels. |
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MarkyMarkD
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| Posted: Sat Jan 23, 2010 6:14 pm Post subject: |
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| Ord wrote: | | MarkyMarkD wrote: |
As for Ord's "Nationwide sticks to its more expensive promise" I think that's because it wasn't hedged as being "not in exceptional circumstances".
You can bet your bottom dollar that (a) Skipton got FSA approval up-front for this change, and hence nobody's going to successfully challenge it and (b) Nationwide can't do the same because it would breach the terms of their customers' deals. |
So is Nationwide nobbled for the next decade ?
Is there no society able to mop up the detritus from the rest of the sector that will appear in the next two years?
It rather defeats the BSA's case to the government ( on banks being helped when BSs are not ) when so much of the damage to the mutual sector has been stupidly self-inflicted. |
I don't understand why you suggest Nationwide is nobbled for the next decade. But I would agree that it's nobbled whilst BBR remains at ridiculously low levels.
And I doubt it can mop up anyone else, simply because it's already got indigestion from mopping up Cheshire, Derbyshire and most of Dunfermline.
I don't understand the self-inflicted argument either. Lots of building societies lent on tracker rates; so did lots of banks. Both have suffered as a result. Both banks and building societies gave unnecessary tracker-capped guarantees on their SVRs because they perceived a marketing advantage at the time. But the banks have been helped with lots of extra capital; the building societies have had nothing.
There is definitely an argument for recapitalisation of the building society sector, because without it Societies will not be able to compete - witness the fact that the best products currently available for borrowers are from banks, precisely because they have lots of spare (taxpayer-introduced, in the main) capital and can afford to lend.
But the only activity the government is taking is to enact laws which will progressively limit the Societies' ability to borrow - for example, making PIBS an even less useful form of capital than they are now, from 2020 onwards.
A solution is required but I doubt that the government has got the ability to think of it. |
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Ord
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| Posted: Wed Jan 27, 2010 5:34 pm Post subject: |
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| MarkyMarkD wrote: | | I don't understand the self-inflicted argument either. Lots of building societies lent on tracker rates; so did lots of banks. |
Your comparison doesn't work, and perhaps explains your misunderstanding.
Name a bank which effectively put ALL its borrowers on a tracker rate (like Skipton & Nationwide). |
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MarkyMarkD
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| Posted: Wed Jan 27, 2010 10:11 pm Post subject: |
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Barclays, for example, lent at virtually nothing other than lifetime tracker rates in the last few years. I should know - I have one.
Last time I looked, LTSB (C&G) also had an SVR which guaranteed to track BBR and also at 2.5% - exactly the same as Nationwide. Perhaps it's your lack of understanding, Ord?
The mutual sector has been no more guilty of making silly promises than the banking sector: a couple out of 50 or so societies is scarcely "so much of the damage to the mutual sector has been stupidly self-inflicted". |
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Ord
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| Posted: Thu Jan 28, 2010 5:54 pm Post subject: |
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You are right about C&G (another millstone for the taxpayer), although Barclays is 4.99% when I just looked.
The trouble with Nationwide is that it is now over half of the mutual sector - so any self-inflicted error by its board also hits the sector for six. |
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MarkyMarkD
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| Posted: Thu Jan 28, 2010 11:48 pm Post subject: |
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Yes, I thought of that point but didn't mention it.
Nationwide is a distortion to the whole building society sector, and ought to be considered independently in any assessment.
It is a shame that Nationwide has inflicted such a foolish wound on itself - but far worse that it extended this wound to ex-Cheshire and Derbyshire borrowers, for no logical reason at all. |
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Ord
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| Posted: Sat Jan 30, 2010 12:39 pm Post subject: |
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| Yes, no bank would be so daft (e.g. Lloyds extending the C&G 2.5% to all Halifax / BoS customers - unthinkable). |
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MarkyMarkD
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| Posted: Sun Jan 31, 2010 11:11 pm Post subject: |
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Did they do that as well?? D'oh!
Or is your point that they didn't, because to do so would have been stupid? |
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