Nationwide fires the first shot in fight to stay mutual

NATIONWIDE, the world's biggest building society, yesterday fired the opening shots in a renewed campaign to stay mutual as it announced unprecedented success in attracting savers and borrowers.

Pointing to a 55 per cent boost in its share of the mortgage market, executives said they would be handing pounds 300m back to members in better saving and borrowing rates, pounds 100m more than last year.

The society claimed it "could not lose" in the price war for savings and mortgages as it hiked its savings rates by 0.35 per cent, 10 basis points more than the rise in base rates last Thursday.

A dramatic influx of savers gave Nationwide an exceptional 20 per cent of the market in the year to April, boosting its savings balances from pounds 27bn to pounds 33bn and contributing to a bumper rise in profits of 40.6 per cent. Assets grew by 16.4 per cent to pounds 47.1bn.

The society faces a vote next month on a proposal to take steps towards converting the society to a bank. Nearly 8million customers will receive voting forms over the next week.

Two members in favour of conversion, Michael Hardern and Andrew Muir, are standing for election to the board. Brian Davis, the chief executive, said the results were possible because Nationwide could undercut rivals who paid dividends to shareholders. The society now offers a variable rate mortgage at 8.1 per cent - against 8.7 per cent for most converted societies.

"One has to ask why our competitors in the market have been getting up and giving lectures as to why we should convert. At the end of the day it will be very much to their advantage if we do convert.

"The markets will see our results today and they will see what a strong competitor we are and I don't think that can be anything but bad news for them. There is no way we can lose a pricing war."

Nationwide said the average member with a pounds 50,000 mortgage would gain pounds 250 a year if its rates were half a percentage point below other lenders. Members in favour of conversion have proposed a windfall worth pounds 500 per member.

If the July vote is in favour of staying mutual, the society will be protected by regulations from holding another conversion vote for the next three years.

The robust set of results rebounded on converted societies yesterday. Halifax saw its share price sink by more than 3 per cent to 861p, valuing the average windfall of 330 shares at pounds 2841. Alliance & Leicester slipped to 825p from 833p.

Abbey National shares dipped by 3 per cent to 1,079p but recovered after it announced a hike in interest rates of 0.25 percentage points. Mortgages between pounds 60,000 and pounds 100,000 will now cost 8.9 per cent.

Other banks are likely to copy the rate rise over the next two weeks. Mutual building societies, which resisted the last rate rise as part of their battle for market share, are set to raise rates. But they are adamant they can keep rates lower than banks.

Converted societies have been hit hard recently by volatility in their share prices. Halifax shares rose from 502p when it floated last July to 1,000p at the end of 1997 before settling back to their current price.

Mr Davis also attacked rivals savings groups such as Tesco and Northern Rock for seeking to attract new savers with higher rates than they pay to existing customers. He called for such practices - known as "portfolio management" - to be banned.

Outlook, page 19

Start your day with The Independent, sign up for daily news emails
News
news
New Articles
tvDownton Abbey Christmas special
Arts and Entertainment
Wolf (Nathan McMullen), Ian (Dan Starky), The Doctor (Peter Capaldi), Clara (Jenna Coleman), Santa Claus (Nick Frost) in the Doctor Who Christmas Special (BBC/Photographer: David Venni)
tvOur review of the Doctor Who Christmas Special
News
peopleIt seems you can't silence Katie Hopkins, even on Christmas Day...
PROMOTED VIDEO
News
i100
Arts and Entertainment
Jenna Coleman as Clara Oswald in the Doctor Who Christmas special
tvForget the rumours that Clara Oswald would be quitting the Tardis
Arts and Entertainment
Japanese artist Megumi Igarashi showing a small mascot shaped like a vagina
art
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Life and Style
fashion
Arts and Entertainment
Left to right: Stanley Tucci, Sophie Grabol and Christopher Eccleston in ‘Fortitude’
tvSo Sky Atlantic arrived in Iceland to film their new and supposedly snow-bound series 'Fortitude'...
Arts and Entertainment
tv
News
The Queen delivers her Christmas message
newsTwitter reacts to Her Majesty's Christmas Message
Sport
sport
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Day In a Page

A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all