Nationwide Building Society admitted it could face three years of shrinking market share in its core home loans business after starting a price war earlier this year. But the society, the UK's fifth-largest lender, said it believed its new pricing strategy, eschewing loss-leading discounts on interest rates, would eventually be copied by rivals. Brian Davis, chief executive, said branches were selling more home loans than usual but not enough to make up for the near-collapse in sales through mortgage brokers. "As long as we treat people fairly and as long as we don't have a massive hole in the business we won't be worried," he said. "We are doing less than our natural share [8.5 per cent of the market] but that is what we expected to happen."
Nationwide set out to change the structure of the mortgage business by scrapping upfront discounts in order to give "fairer" low prices to all customers. But other lenders, particularly market leaders Halifax and Abbey National, responded by giving lower rates to customers on request, while continuing to use low upfront rates to attract new business. Mr Davis said this practice was "unsustainable" as well as unfair and called for the government to force lenders to apply the Cat standard, the voluntary kitemark.
Products reaching the Cat standard must calculate interest daily, be available to existing customers as well as new customers and have no hidden small print. "People are being exploited," he said. "It is extraordinary." However, the Treasury is not thought to be considering making the Cat standard compulsory. Mr Davis was speaking as he unveiled a sharp fall in the society's share of new mortgage business for the year to April 4 from 12 to 9.1 per cent. But it is still taking more than its historic 8.5 per cent share of outstanding loans.
Pre-tax profits rose 9.9 per cent to £465.7m and the society claimed it had returned another £402m to members, who own the mutual, through better prices than it would otherwise offer. Mr Davis repeated his commitment to keeping the society mutual despite attempts by carpetbaggers to force it to convert to a bank. An attempt to force a conversion vote at the forthcoming annual meeting was rejected for legal reasons, and the earliest a special meeting for a new vote could be called is November.
Nationwide set out to change the structure of the mortgage business by scrapping upfront discounts in order to give "fairer" low prices to all customers. But other lenders, particularly market leaders Halifax and Abbey National, responded by giving lower rates to customers on request, while continuing to use low upfront rates to attract new business. Mr Davis said this practice was "unsustainable" as well as unfair and called for the government to force lenders to apply the Cat standard, the voluntary kitemark.
Products reaching the Cat standard must calculate interest daily, be available to existing customers as well as new customers and have no hidden small print. "People are being exploited," he said. "It is extraordinary." However, the Treasury is not thought to be considering making the Cat standard compulsory. Mr Davis was speaking as he unveiled a sharp fall in the society's share of new mortgage business for the year to April 4 from 12 to 9.1 per cent. But it is still taking more than its historic 8.5 per cent share of outstanding loans.
Pre-tax profits rose 9.9 per cent to £465.7m and the society claimed it had returned another £402m to members, who own the mutual, through better prices than it would otherwise offer. Mr Davis repeated his commitment to keeping the society mutual despite attempts by carpetbaggers to force it to convert to a bank. An attempt to force a conversion vote at the forthcoming annual meeting was rejected for legal reasons, and the earliest a special meeting for a new vote could be called is November.
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