Building society assures customers

Mar 28 2008 by Aled Blake, Western Mail

A BUILDING society which has decided to lend to local people only, yesterday said it had made the move to ensure it could continue offering high service standards.

Monmouthshire Building Society emerged on Wednesday as one of several mutuals around the UK to restrict business after being inundated with customers.

In an effort to allay customers’ fears, Monmouthshire sent out a “business as usual” message and stressed it had not been adversely affected by the credit crunch which has hit the world’s money markets.

Large mortgage lenders have been raising their rates and tightening their lending criteria for some time now, as they face higher borrowing costs after the wholesale money markets dried up.

Smaller lenders, who fund their mortgage book through deposits, had escaped the crisis relatively unscathed, but many are now being forced to introduce restrictions as they struggle to keep up with the volume of business they are receiving.

Yesterday Monmouthshire said its priority was “to meet the needs of local people by offering attractive products backed up with high service standards”.

It said, “Recently, because many of the large mortgage lenders have been restricting access to mortgages, we have experienced an unprecedented level of business from all over the UK from potential customers seeking to make use of our mortgage products.

“If allowed to continue, the society believes this will have a detrimental effect on our service standards.”

Andrew Lewis, chief executive of Monmouthshire, said, “To ensure we maintain our high service standards we are temporarily not accepting applications from mortgage introducers.

“We are still however considering applications made by local customers in person.

“We believe this will be a temporary measure but is necessary to continue to provide the high service standards which our customers expect.

“The message to these customers is that it is very much business as usual at the Monmouthshire.

“Meanwhile, our building society is enjoying a record financial year, is well managed and is financially very strong.

“Unlike some other financial institutions, we have not been adversely affected by the credit crunch because our business is primarily funded by savings deposits and not the wholesale markets.”

Among the other building societies to have restricted business to people living in their local area are Tipton & Coseley, Newbury, Melton Mowbray, and Holmesdale building societies, while Chelsea and Mansfield building societies are no longer accepting business from mortgage brokers.

Denise Harvey, mortgage analyst at Moneyfacts.co.uk, said, “Until a couple of weeks ago it seemed that smaller building societies had escaped the worst. By funding their lending through deposits, they appeared to be immune from the problems facing the money markets. The last two weeks, however, have shown a very different story.”

The number of different mortgage deals available has dived by nearly two-thirds since the credit crunch first hit last summer to just over 5,700 at the end of last week, according to financial information group Moneyfacts.co.uk.

The group said yesterday that 2,026 residential and buy-to-let loans had been pulled during the past month alone as lenders responded to the credit crunch.