BBC Homepage World Service Education
BBC Homepagelow graphics version | feedback | help
BBC News Online
 You are in: Business
Front Page 
World 
UK 
UK Politics 
Business 
Market Data 
Economy 
Companies 
E-Commerce 
Your Money 
Business Basics 
Sci/Tech 
Health 
Education 
Entertainment 
Talking Point 
In Depth 
AudioVideo 

Wednesday, 18 April, 2001, 13:50 GMT 14:50 UK
Nationwide struggles in mortgage war
Nationwide shop front
Nationwide is failing to entice new customers
A recent shake-up of mortgage rates at the Nationwide is proving unpopular with borrowers.

The firm overhauled its lending policies in March, scrapping discount mortgages to new borrowers in order to be fairer to existing customers and bring the overall rate for all borrowers down.

But the strategy - seen as a high-risk one - has not been adopted by other building societies, and borrowers have simply opted for the more attractive headline rate of competing lenders.

Nationwide admits that its sales of mortgages through Independent Financial Advisers have declined, but has not released specific figures.

Struggling to compete

The independent mortgage brokers John Charcol say that the fall in Nationwide mortgage sales is "certainly significant".

A spokeswoman for the brokers told BBC News Online that the firm is supportive of the Nationwide's "well-intentioned" mortgage cuts, but that customers - who always go for the cheapest option - drive demand.

Independent Financial Adviser
More mortgage buyers are looking for independent advice
Nationwide offers a base mortgage rate of 6.24% to both existing and new borrowers, but GMAC is enticing new customers to a two year fixed rate at 4.99%.

On a loan of 100,000, this would save the borrower 1,250 (104/month) in interest.

Nationwide admits that sales of mortgages through intermediaries are declining, but says that it is "happy" with overall sales.

Customer retention

A spokeswoman told BBC News Online that it blames brokers for failing to properly understand the advantages of its new deals, and expects brokers to grasp the "fundamental shift" better in time.

It also says that customer retention, re-mortgaging and direct sales through branches have risen since the changes.

But brokers say that the building society looks likely to continue to lose market share while it is offering less competitive rates.

Non-direct sales used to make up about half of Nationwide's total mortgage sales.

And an increasing number of borrowers are using financial advisers rather than going directly to a bank or building society, given the increasing complexity of the UK mortgage market.

Forced subsidies

In March, Nationwide introduced a new basic rate of 6.49%, called the "base mortgage rate" (BMR), for existing and new borrowers.

Following the Bank of England's interest rate cut, this will now be trimmed to 6.29% from 1 May.

Half a million Nationwide customers have benefited as the rate they pay fell from 7.09% to 6.49% - equivalent to a 23 per month fall on a 60,000 repayment loan.

The building society says that its new rate will protect existing borrowers, who have typically been forced to subsidise new borrowers.

Nationwide estimates there are currently around three million borrowers with mortgages totalling 100bn in the UK.

It says that if all major lenders followed Nationwide's approach it would lead to an overall saving of more than 1bn a year for existing borrowers.

Search BBC News Online

Advanced search options
Launch console
BBC RADIO NEWS
BBC ONE TV NEWS
WORLD NEWS SUMMARY
PROGRAMMES GUIDE
See also:

08 Feb 01 | Business
Mortgage rates cut
09 Feb 01 | Business
Banks profit from rate cut
08 Feb 01 | Business
UK interest rates cut
30 Jan 01 | Business
Housing market levels out
01 Feb 01 | Business
House prices race into 2001
08 Jan 01 | Business
Housing market - boom or bust?
21 Nov 00 | Business
Nationwide cuts mortgage rate
16 Nov 00 | Business
Lenders confirm mortgage struggle
19 Feb 01 | Business
Nationwide slashes mortgage rate
Internet links:


The BBC is not responsible for the content of external internet sites

Links to more Business stories are at the foot of the page.


E-mail this story to a friend

Links to more Business stories