Money News: 'Low rates for all' ends in U-turn by Nationwide

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The Independent Online

Nationwide building society was accused of performing a startling U-turn last week after it dropped a commitment to offer all customers the same mortgage rates.

The mutual will now charge two different rates of interest on home loans, making them generally more expensive for those remortgaging than for first-time buyers or people moving home.

Stuart Bernau, Nationwide's executive director, said the changes would allow the building society to "offer competitive deals" for a wide range of homebuyers and owners.

But mortgage brokers, accused Nationwide of turning its back on a pledge to treat all customers equally.

"Nationwide has shot itself in the foot by being all smug about treating customers equally - both new and existing ones - and then backtracking on that policy," said Melanie Bien of mortgage broker Savills Private Finance.

The old approach, she said, had set the building society apart from other lenders, whooffered low rates to new customers while hitting loyal existing customers with high rates.

Now Nationwide has discovered what all the other lenders found long ago, Ms Bien added: that it can't offer really cheap rates to everyone. "It's just not commercially viable."

Ray Boulger of broker John Charcol expressed surprise that a lender that had gone to such great lengths to make itself stand out "could do such an about-turn like this".

Nationwide, currently mid-merger with rival Portman, has spent millions on high-profile adverts, including many featuring 'Northern Lights' TV star Mark Benton, to hammer home its "same rates for all" policy.

Advertising: Bad-credit brokers targeted by FSA

More than 200 mortgage brokers who find home loans for borrowers with poor credit histories have been ordered by the Financial Services Authority to withdraw or amend "misleading advertising".

In a 12-month review of the so-called "sub-prime" home loan market, the City regulator scoured hundreds of mortgage adverts, flyers and classified ads in directories and regional newspapers to check for misleading information.

It found plenty of offending material. In some cases, fees advertised differed enormously from those consumers ended up paying; in others, borrowers were sold expensive sub-prime mortgages when there was no evidence to show they would have been refused a standard home loan.

The FSA referred a number of mortgage brokers to its enforcement division for "further investigation" after finding that those who issued "poor advertising and promotional materials" were also likely to have "inadequate systems and controls" in place to manage their business.

The FSA's retail themes director, Vernon Everitt, said standards had to rise in the sub-prime market - and fast: "Financial advertising has a massive influence on the decisions people make, so it must be clear, fair and not misleading."

In the past two years, the FSA has taken enforcement action in 12 cases relating to financial promotions, leading to fines of more than £1.5m.

Home credit: Borrowers to get a fairer doorstep deal

Doorstep credit companies will have to share their customers' repayment records as part of a shake-up to lower the cost of credit, the Competition Commission said.

Lenders will also have to publish the cost of credit online to allow consumers to compare different rates, and must ensure that customers are not unfairly penalised for early repayment of loans.

"These [proposals] are designed to open up the market to greater competition so that customers will get more choice and lower prices," said Peter Freeman, chairman of the commission. "Despite the high cost, home credit is much valued by many customers and we would not be helping these people if we made it less available."

The new rules will be in place by the end of 2007.

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