Mortgage crisis hits Britannia members by Finance News Bulletin

Published: 13/12/07

Savers and borrowers with Britannia Building civilization could see the value of their annual member reward - the joint's equivalent of a dividend - drop next year as a result of the credit crisis surrounding the mortgage industrycontent: Mike Fowkes is pleased with Britannia but says most populace do not understand building societies' businessesBritish mortgage lenders want us to take away our novel house price crash calculator Read more

The Editor's BlogGet an idea of some of the best mortgage interest tax on the market with our tables >> Mortgage taxBritannia, the second biggest joint lender after Nationwide, is especially vulnerable to the praise crunch because its subsidiary, Platform, depends on capital markets for much of the money it lendsstage is as big a business as the society's Britannia-branded process and in new years has generated far more profit, much of which gets handed on to associates through their yearly associate reward

But Platform's business is under force and the society has warned that proceeds this year are unlikely to exceed 2006 levels It says the membership reward, which last day totalled £51m, 'might be impacted'Worst-hit in the credit crunch have been shareholder-owned banks, such as Northern Rock, that raise most or all of their capital from cash markets While Northern Rock has been all but wrecked, other banks, such as Kensington and GMAC, have shrunk their businesses and laid off employees

A Britannia orator says: 'So far we have not had to cut back staff That is not to say we won't have to Britannia's core member business is in robust physical condition Because we are not a bank, we are not under pressure to pay dividends to shareholders, so we do not need to focus on short-term proceeds

'Britannia member Mike Fowkes, who has been with the civilization since 1966, reckons members of mutuals tend not to be acquainted with too much about their societies' businesses'Most populace choose the Britannia because of how it markets itself or the level of customer service they get at their branch But they don't actually, actually understand what goes on at a commerce level,' he saysMike, 63, a retired local government manager from Cannock, Staffordshire, is generally impressed with Britannia and its management team led by leader executive Neville Richardson

He says: 'Their service at the Stafford bough I use is not awful, but it's very difficult for ordinary members like me to get beyond the branch on the High road and understand how the society is operating at a higher height'Though Britannia's exposure to the credit crunch is unusual among mutuals, other societies are likely to see income growth fall absent or reverse for other reasons Many societies have pulled back from historically profitable areas of commercial and property-owner lending or have stopped lending to borrowers whose praise histories are less than perfectMid-size society Stroud & Swindon, for example, has shelved tactics to extend its buy-to-let business and Britannia has abandoned a proposed tie-up with Irish society EBS

Other societies carry on to lend in these areas, but have changed the criteria of their lending, exclusive of riskier borrowers altogether or limiting the size of their loans This is likely to have a negative impact on profits Most societies, however, speak mainstream lending is physically powerful and - as Financial Mail has reported previously - structure societies continue to occupy the majority of top slots in our mortgage best-buysWest Bromwich and Nationwide report half-year consequences this week

Both building societies are expected to speak that their savings intake lifted over the summer, as a straight result of the run on Northern RockSkipton Building Society, which with 17 subsidiary companies is one of the most gainful mutuals in relation to its size, could also suffer a profits squeeze in the current marketplace - leading to less good-looking deals for its 600,000 savers and borrowersWhile it does not depend on assets markets to raise money, a large slice of Skipton's proceeds has come from estate agency arm Connells and other possessions businessesConnells generated £87m of the society's total £148m profits last year, a payment that included £16m raised from the store market flotation of internet estate agency rightmove

couk Though further Rightmove proceeds have drinkable into Skipton's coffers for 2007, that rarity lift is endingMeanwhile, Connells' underlying commerce, like all estate agencies, is expected to suffer as the housing marketplace falters or falls

A spokeswoman for Skipton says: 'all right, Connells is likely to see volumes tail off, but the structure of the business is such that it can weather tough marketplace conditions It has done so successfully in preceding downturns'Select a loan term 12 months (1 year) 24 months (2 existence 36 months (3 existence 48 months (4 existence 60 months (5 existence 72 months (6 existence 84 months (7 existence 96 months (8 existence 108 months (9 years) 120 months (10 years)Please choose a type of cover Life cover Home and contents Car Breakdown services Health - medical Health - dental journey Pet - dog Pet - cat GOThinking about investing in possessions This is Money has the most excellent buy-to-let information and advice

>> Buy-to-let

Visit original article: