Podcast Summary
Andy Golding is back from holiday and has the latest news from Saffron and the Building Society Sector
Andy had a week's holiday at the start of this month. Time away is important, but most of us worry about what challenges might await our return. But, Andy, you say there have been snippets of good news in your inbox?
Yes. Firstly, the FTSE, pound and commodity markets have had a bit of a positive rally. Also, we have reports that house prices went up in May - 1.9% according to Nationwide and 2.6% according to Halifax. I also heard from the BSA that building society mortgage approvals were 14% higher in April than in March this year. Looking at employment, Human Resources magazine has recently claimed that the rate of decline in available jobs has slowed in May.
Some of the numbers are encouraging. Do you think a change in confidence will follow?
It's obvious that we're not out of the woods yet, but the BSA have reported that 55% of Building Society CEOs are now feeling optimistic about 2009. The low-rate environment is challenging, but building societies feel that with careful management, they should be able to ride out the recession and, more importantly, be stronger and fitter when they come out the other side.
There are still murmurings in the media suggesting that more Building Societies could fall fowl to the recession. The events at Dunfermline surprised us all. West Bromwich building society may be denying a rescue deal, but they've still not declared their annual results. What's to say this couldn't happen again?
It does seem that the press have been on the hunt for bad news recently, which is a shame. Yes, most society profits were down in 2008 on the previous year, but this shouldn't be surprising in a recession and where the Financial Services Compensation Scheme has taken such a large chunk from all of us.
I cannot be absolutely certain that some societies won't conclude that they will do a better job for their members through merger with a stronger partner. By and large, the sector will look after its own, and it would be inappropriate to speculate on the possible outcomes should another Society need additional support.
Dumfermline and West Bromwich are large societies, making their problems all the more worrying. But isn't Saffron, as a smaller society, equally vulnerable?
Some small societies have indeed sought mergers over the last few years, and I concede that others may still do so, but I have the benefit of knowing exactly what is happening at Saffron and I am excited about our future as an independent mutual. Being smaller has advantages. We are able to adapt quickly to changing conditions and have the flexibility to review products regularly. This more nimble approach, combined with us focusing on the efficiency of our operations, will see us continue to deliver creditable financial results, whilst listening to our members to help shape our future strategy.
Remember - bad news sells more than good news. Journalists are far more likely to report the doom and gloom than hints of recovery, there are some without doubt.
It will be a while until we can be confident, and we have to be aware that we may see some upward signs, only to be followed by more bad news as the economy here and globally stabilises.
You talked about mortgage lending stabilising - and Saffron is back in the first time buyer market this week. Tell us about the new product.
We're offering a 2 year fixed First Time Buyer product at 5.65% - with up to 90% Loan-to-Value and a £200 discount on fees if the borrower or their family holds a £1000 in savings with the society. The mortgage is only for people living in Saffron's catchment area - if you're not sure what that encompasses, you can find out on our website.
Property has become much more affordable for first time buyers but there is a distinct lack of suitable mortgage funding available to them. Though Saffron can't get the whole UK housing market moving again, assisting those buying within our area is a good start and I hope that other regional lenders will follow suit.
Helping local first time buyers is always a clear steer from our members when I talk to them. First time buyers are critically important for the market as a whole as the catalyst for the rest of the chain. This kind of initiative is exactly what a regional mutual should be doing to help our community.
Now is also a sensible time to fix your mortgage in general. We are undoubtedly at the bottom of the interest rate cycle but this low-rate luxury won't last forever. Should rates rise as high as after the last economic downturn, a fixed rate of around 5% could feel very reasonable in the not-too-distant future. If you wait for your current deal to come to an end, you could be looking at a much higher rate in a few years.
Wise words. Finally, we touched upon the new ISA rules for the over 50s in the last podcast. Have Saffron decided how they're going to adapt their ISA accounts to the new rules?
Obviously we want to help the over 50s take advantage of the new £5100 cash ISA limit as soon as possible. Revenue and Customs have recently clarified that those who turn 50 between 6th October 2009 and 5th April 2010 will not have to wait until their 50th birthday to take advantage of the increased limit.
Anyone who is eligible will be able to top up their ISA from 6th October 2009 - including those on a fixed rate product where previous rules only permitted a one-off payment in to the account. So if you're turning 50 before 5th April 2010, you can top up from 6th October.
We will also be making a change to our Regular Saver ISA from October 6th. Eligible savers will be able to increase their monthly deposit from £300 a month to £550 per month, to ensure they hit the £5100 limit by April 2010.
We're currently processing these changes on our systems, but once they're established and tested, we'll be writing to all ISA customers to let them know our plans and what, if anything, they need to do to get the most out of their allowance.
There you go - we have a strategy to meet the new rules and you heard it here first!
