Nationwide holds a unique position in UK financial services. As the largest building society, we can deliver the valuable banking products and services and mutual good to our customers that others cannot.
As a building society, we are owned by our members – our customers who have their current account, mortgage or savings with us. We do not have to pursue profit to pay shareholders dividends. Instead, we balance our need to retain sufficient profit to remain financially strong with rewarding members and our commitment to share our success. We aim to return additional value to our members as owners through our Nationwide Fairer Share products and payments. And we know the importance of face-to-face banking; if we have a branch in your town or city, we’ll still be there until at least 2026.
To help us deliver fairer banking, Nationwide believes there are some key policy changes that would tackle issues faced by our customers every day. These changes would be a starting point to help address some of the challenges that will be facing any future government.
Home ownership is increasingly out of reach for many people but remains an aspiration for most. For example, one poll has shown that 80 per cent of 25- to 34-year-olds would prefer to own a home than to rent. To help make clear the challenges of becoming a homeowner and ensure a long-term coordinated strategy to address the housing crisis, Nationwide would like to see a first-time-buyer review to increase the supply and ownership of homes.
This review, with an independent chair, would cover mortgages, housing supply, planning reforms, house-building and the house-buying process. It could incorporate measures to support mortgage lending, including increasing the current 15 per cent limit on lending at more than 4.5 times income. It would look at issues around affordability and mortgage deposit requirements which remain a major barrier. A 10 per cent deposit on a typical first-time-buyer property is equivalent to almost 60 per cent of annual gross earnings.
One policy this review should look at is reintroducing Help to Buy ISAs. This would provide much-needed financial support for first-time buyers. The original Help to Buy ISA was a popular product that helped many people build a deposit before it closed for new applications in November 2019.
An ISA specifically for first-time buyers was a key factor in encouraging younger people to save for a deposit. It helped provide fairer access to mortgages by providing some support to people without family support. The original scheme has been used to help 558,176 property completions. The median age of a first-time buyer using the scheme in 2015-20 was 28, compared with a national first-time buyer median age of 30 in the same period. An updated version, taking into account changes in interest rates and house-price increases, would provide vital support.
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One of the key reasons that Nationwide can help first-time buyers is our status as a mutual. Mutual organisations are owned and run for the benefit of members, unlike PLCs. Such a diverse range of business models in different sectors gives consumers more choice. Mutuals do not have to pay dividends to shareholders so they are able to reinvest profits in better pricing or services for members. For Nationwide this means we are able to offer more competitive savings rates, keep branches open and, for the first time this year, make a direct profit-sharing payment, Fairer Share, to eligible members.
But mutuals often have to work within structures designed for more common business types. For example, they have less scope for generating capital, making it harder for them to grow. The current regulatory and legislative framework is agnostic towards mutuals and tends to lean towards the traditional stock company model, causing additional cost and leading to competitive disadvantage.
This is another area in need of change. A government commitment to double the size of the cooperative and mutual economy would be an important sign of support for diversity of business models, as would the strengthening of mutuals in the financial services sector.
Nationwide would like to work with politicians and government to create a better policy understanding of mutuals. Government should collaborate with mutuals on the creation of data that monitors the health of UK mutuality. Specific policy measures could include protecting the longevity of building societies by updating the Building Societies Act 1986, and introducing mutual capital instruments to support the entry and growth of new players.
Nationwide’s mutual status enables us to focus on protecting our customers from fraud and scams, too. Fraud is the most prevalent crime in the UK, costing victims £12.8bn in Home ownership is increasingly out of reach for many – but it remains an aspiration 2021-22. Research from the Social Market Foundation shows that the impact of fraud on victims is wider than purely economic, with 35 per cent reporting detrimental impacts to their confidence, and 25 per cent to their mental health.
Banks and building societies are focused on tackling fraud but we are calling for a great share of liability for the cost of reimbursement across all organisations in the “fraud chain”. In particular, we would like to see big tech, social media and telecoms play their part to help block and prevent crimes. Fake adverts on social media, spoofed messages and scam calls can and must be cut off at the pass.
Nationwide is calling for the creation of a central “hub” that brings together multiple industries, government and law enforcement, to share data and collaborate to tackle fraud. By doing this we hope to protect more consumers from becoming victims of it.
Protecting people from crime, helping them into a secure home, and supporting consumers are areas where business is ready to work with government in order to deliver the support people need. A future programme for government should take an optimistic view on solutions that can be delivered – and help secure genuine collaboration that would benefit us all.
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