Hamptons Mortgages welcomed the merger as good news for the mortgage industry and for mortgage customers.
The merger will see the combined building society become the second largest mortgage lender in the UK after Halifax. Hamptons Mortgages welcomes this strong challenge to the dominance of Halifax as it will lead to more competition within the mortgage sector.
Jonathan Cornell, technical director at Hamptons Mortgages, commented: “Halifax has dominated the mortgage lending industry for many years but this new merged society will mean some serious opposition to HBOS - which is long overdue. Increased competition in the already cut-throat world of mortgage lending can only be a good thing for consumers as it will inevitably lead to greater product innovation and slashed to the bone rates as these two leviathans wrestle for market share like Hector and Achilles. Further consolidation in the building society sector will further increase the battle. I look forward with fascination to the fight ahead.”
Meanwhile, Moneyfacts believed customers would benefit but its competitors should be wary.
Darren Cook, head of mortgage research at moneyfacts.co.uk, commented: "The merging of the two mortgage arms brings together two very different entities. Nationwide, the largest UK building society with assets over £120bn, is a high street name with a marketing budget to rival the banks. The Council of Mortgage Lenders (CML) estimate Nationwide’s 2005 mortgage book to be worth £89.6bn. Nationwide’s mortgage offering is characterised by:
- a broad product range
- tiered fees, with higher fees for remortgages compared with first and second-time buyers
- a focus on branding and customer retention
- below average SVR (standard variable rate) of 6.24 per cent
- interest calculated on a daily basis
“Portman BS, despite the recent merger with Lambeth BS, is a much smaller entity, with total assets under £20bn. According to the CML estimates, its mortgage book was £13.5bn in 2005. Portman has a much smaller marketing budget and uses a completely different origination strategy – it focuses on offering the best or one of the best two or three year fixed-rate mortgage deals. Portman’s mortgage offering can be characterised by:
- a focused selection of mortgages
- emphasis on two and three-year fixed rates
- an origination strategy focused on best buy charts and tables on the web and in print
- SVR of 6.75 per cent
- interest calculated on an annual basis on all most all of the product range
“Both Nationwide and Portman currently have competitive mortgage ranges, with Portman featuring consistently in our ‘Best Buy’ selections and Nationwide appearing just outside. If the favourable features are combined from both ranges, Nationwide should have one of the strongest mortgage ranges on the high street.
“There are some distinct differences between the two mortgage ranges, Portman BS uses ability to pay whereas Nationwide uses income multiples for affordability testing. Also, Portman generally charges interest on an annual basis rather than Nationwide, which uses a daily calculation.
“There is still a long way to go until the proposed merger date of the end of September 2007, with the FSA, OFT and Portman’s members to give their approval. We should continue to see customer being able to make informed decisions in a highly competitive mortgage market that still sees more than 125 mortgage providers competing for their business.
“Hopefully, as Nationwide remains a mutual, any cost-savings through synergies should be passed onto the customer through improved products across the range.”
