Mutual Lenders – Your Role In Building The UK Back To Health

I realised whilst listening to Sara Bennison, Chief Product and Marketing Officer from Nationwide Building Society speak at the Digital Housing Summit last week, that I still have a very clear memory of the lilt of my Welsh speaking primary school teacher’s voice on the day that she taught my class about the origin of building societies.

Sara got me thinking about whether in future borrowers will be anxious about how their Lender will treat them during tough times. Will they be bothered about what support lenders offered during Covid-19 when deciding on their first/next mortgage company? Considering this would be a seed change away from the previous goal of chasing the lowest interest rate.  Values not value.

Borrowers have received assurance from the Nationwide that there will be no repossessions until 31.05.2021. Furthermore, landlords who have taken payment holidays are being encouraged to pass these on to tenants. 300,000 Nationwide Building Society customers have elected for a payment holiday of some sort since the Covid-19 lockdown.

The building society movement, now operating as mutual organisations continues to embrace the original co-operative foundations which have really stood up to the effluxion of time.

At the beginning of the movement, to attain the dream of home ownership, workers dropped any change they could spare from their wages into a pot each week (My teacher didn’t tell us that this was often a pint glass in a pub!). Once a large enough sum was amassed this was used to purchase land and building materials.  Workers laboured together to build their own homes and I suspect went back to the pub for a pint or two during the process to quench their thirst!

I took a moment to appreciate that this act of collecting and pooling loose change signalled the start of what we today refer to as crowdfunding.  By harnessing the power of the crowd and working co-operatively, workers removed the barriers that that they had previously faced in the late 19th Century around accessing credit and finding themselves secure long-term housing.

These challenges are still prevalent in the UK today and additionally, affordability is a major barrier to home ownership.

The Covid-19 pandemic has affected credit conditions and lenders are currently reluctant to lend, apart from to borrowers who have sizeable deposits. The rationale behind this is that lenders have no desire to encourage borrowers in to negative equity, which could happen against lower deposits and a higher percentage borrowing. There’s clearly no appetite to return to the early 1990’s negative equity mortgage products, utilised to transfer negative equity with a borrower when they moved.

This week Boris Johnson launches a construction spending spree to facilitate building the UK back to health after the Covid-19 pandemic.

The messaging from speakers at the Digital Housing Summit was around the need for good quality social housing. This applied equally to new builds and existing social housing stock and there was a lot of commentary around connectivity and joining communities.

My belief is that mutual lenders are well placed to drive the desire for good quality housing schemes, including social housing because:

  1. Historically their roots are around the principle of self-help.
  2. They are largely embedded and invested in their locales.
  3. They have no shareholders and no pressure to pay dividends. This enables them to invest in their local communities and to go back to their roots – building.
  4. Nationwide Building Society is the second largest mortgage provider in the UK, thus making it an influencer.
  5. They place values over value.

Prior to the pandemic, Nationwide Building Society had started work on a scheme in Swindon, called Oakfield. This is a not for profit sustainable development, built on a brownfield site. The scheme strives for thoughtful home building, creating a community, with a park, play area community hub and paths for walking and cycling.

If every mutual supported a local development scheme, whether this be large or small, they would play an important role in contributing towards the gargantuan effort required to build the UK back to health post Covid-19 and address the plight of poor housing stock.

Mutual lenders – your country needs you, so please step up and play your part in building Britain back to health.

Today's Conveyancer