£600M is price Nationwide paid for base mortgage rate pledge last year
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GRAHAM BEALE, COMMITTED TO FIRST-TIMERS
Nationwide Building Society’s pledge to keep its base mortgage rate no more than 2% above the Bank of England base rate cost it £600m in its last financial year.
About 43% of the society’s mortgage book is on its BMR, its equivalent of an SVR.
Last year its pledge cost it £450m, but it says borrowers have had little incentive to switch deals because of the low base rate and the number of customers on its BMR rate has increased.
Nationwide made the pledge in 2001 but in April 2009 introduced a higher BMR of 3.99% for new customers.
David Hollingworth, mortgage specialist at London & Country, says Nationwide has been living with the problem of its BMR for some time.
He says: “It introduced the new rate in 2009 and will now start to see borrowers moving onto it.
“It drew a line under the offer when it realised interest rates could stay low for a long time, which could create an issue for the society.”
Its accounts also reveal that it increased gross lending to £12.8bn in the year ending April 4 2011, up from £12bn in the previous year representing a 9.5% market share, up from 8.7%.
The lender’s residential mortgage accounts more than three months in arrears have remained static at 0.68%. Overall, it made a pre-tax profit of £317m for the year ending April 4 2010, down on £341m in the previous year.
Graham Beale, chief executive of Nationwide, says: “Our balance sheet has continued to strengthen. Our core Tier 1 ratio is 12.5% - up from 12.2% - and total solvency ratio has increased to 19.5%.
“Strong liquidity, asset quality and a diversified funding base all provide a stable platform for our business.”
He adds: “We remain committed to helping first-time buyers and existing home owners. Our gross residential lending was £12.8bn, representing a 9.5% market share. And 23% of new borrowers during the year were first-time buyers.”
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