Oh what a lovely war

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The Independent Online
BUILDING society executives seem surprised that their members want shares and cash windfalls rather than better interest rates, or the society making thinner profit margins.

They have left members' savings in obsolete accounts, earning a pittance, and have fallen over themselves to offer non-members better deals on mortgages than existing customers. If they had taken their mutuality seriously before they suddenly found their jobs and very existence threatened, their members might be taking them seriously now.

The average building society saver has a balance of perhaps pounds 5,000. Assume a basic windfall of pounds 500 on conversion. On such a balance, it would take 10 years to make the same money if savings rates were improved 1 per cent. Nationwide's offer is 0.25 per cent on savings rates. At this rate mutuality will take 40 years to break even.

Borrowing members have most to fear from conversion. A 0.25 per cent reduced rate on a mortgage of pounds 30,000 gives pounds 75 a year benefit - with the Britannia's points deal, add another pounds l00 a year: total pounds 175. But that's three years to break even and for many the better bet is to remortgage.

If societies were run as non-profit organisations, UBS figures suggest they could improve rates to both savers and borrowers by 0.5 per cent each and an extra 1 per cent for one year only by distributing surplus capital. If this benefit was devoted to borrowers, mortgage rates could be reduced by 1 per cent with a one year extra reduction of 2 per cent. Now that's what I call a mortgage war. If the benefit went just to borrowers, on a mortgage of pounds 30,000 the first year saving could be pounds 900, followed by pounds 300 annually.

Meanwhile, one society spokesman is quoted as saying his members would sell out for two quid; he underestimates their economic literacy. If his comment is an admission thatboards know what their members want, why don't they get on and offer it to them?

Members for Conversion believes that we have a right to be consulted. We therefore urgemembers to exercise rights of ownership and vote against directors who cling to mutuality against most customers' interests.

Unless they are considering non-profit mutuality, slashing costs by debranching and returning their insurance and savings commissions to purchasers, I don't see societies holding the moral high ground for long.

o Michael Hardern, founder co-ordinator, Members for Conversion, 3 Rathbone Street, London W1P 1AE (0171-255 1079).

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