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castrogtx

Nationwide To Hoover Up.

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The Nationwide are clearly attempting to strengthen their balance sheet. They are increasing their rate on their mortgages and lowering their rate on savings. Is this because they will have to hoover-up the failing mutuals (WB first then Chelsea et al) to the bequest of the govt?

What effect will this have on the amount the BS sector will contribute to mortgage lending?

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The Nationwide are clearly attempting to strengthen their balance sheet. They are increasing their rate on their mortgages and lowering their rate on savings. Is this because they will have to hoover-up the failing mutuals (WB first then Chelsea et al) to the bequest of the govt?

What effect will this have on the amount the BS sector will contribute to mortgage lending?

They may well be increasing their rate on mortgages and lowering on savings because:

Mortgage rates set to rise as lenders struggle to cover cost of bank victims scheme

By Daily Mail Reporter

Last updated at 5:05 PM on 21st May 2009

Six out of 10 building societies think they will have to raise their mortgage rates to cover the cost of compensating savers of failed banks, research showed today.

The majority of building society chief executives said the levy they had to pay to the Financial Services Compensation Scheme (FSCS) would have a 'considerable impact' on their business.

Around 60% said they may have to raise their mortgage rates to offset the cost, while 53 per cent said their savings rates may have to fall.

The sector says the current high levy places a disproportionate strain on societies, with Skipton Building Society citing its share of the compensation bill as a major factor contributing to an 86% dive in profits earlier this year.

With regards Nationwide, they don't sound keen but what can they do, is it another Lloyds in the making ? In an article with referece to WB 2 weeks ago :

Nationwide, Britain’s biggest building society, has already bailed out three struggling societies and is said to have a limited appetite to do more deals. The new super-mutual being created through the merger of Britannia and the Coop is among other parties being sounded out by the regulator on their appetite for possible deals.

Building societies fight to the death, and only the strong will remain

The building society industry is in crisis like never before ..........

.........This is a sector in real financial crisis. Most of the remaining 53 societies have seen profits slashed over the past year, mainly through exposure to failed Icelandic banks, coupled with bad debts resulting from a severely depressed property market.

Some even reported 2008 losses --previously unknown in a sector renowned for its prudence and conservatism.

Things are going to get worse before they get better. After credit rating downgrades of some of the biggest societies by agencies Moody's and Fitch, the Financial Services Authority is 'stress testing' **a number of vulnerable societies to ensure they can survive more problems in the housing market. (Moodys and FSA stress tested for 50% - 60% falls , Moodys said "the assumption now is 40% falls)

It is expected that the regulator will force those societies it deems to be facing the most serious threat of collapse into the hands of stronger rivals - most obviously sector giant Nationwide, Yorkshire, Skipton or Coventry. .........

It looks certain that this consolidation is just the beginning and that many more societies will lose their independence before the year is out. ......

Ralph Silva of TowerGroup, the leading financial services research firm, said that up to 15 building societies could be forced to merge within the next year or so but that at least five others would fail on the lines of Dunfermline Building Society.

He said: "At least four or five more will go the same way [as Dunfermline] over the next 12 months. Most building societies wait too long before asking for help and the result will be that some will be too far along to be saved. I think that 10-15 societies could merge within the next year or so – although to be clear, I expect them to merge into other entities, not disappear completely

Effect on mortgage lending? Well the CML and BOE have both said, "the green shoots have no roots" and last week the CML said with regards BOE figures :

"It looks almost inevitable that May approvals will be higher than a year ago for the first time since early 2007. However, activity remains at extremely low levels on any historic comparison – and weaker than at any point in the early 1990s. Limited lending capacity and the impact of further job losses are likely to act as a ceiling for how far the improvement can continue...... ."

And a few weeks ago :

]“I believe the problems at the Dunfermline will soon be mirrored by similar difficulties at societies... No other society can swallow other bad balance sheets whole, so in future there will be no mergers ... taxpayers will take the strain of ensuring the survival of the building society movement.â€

....................Despite being skewed towards more secure retail deposits, 30pc of the sector’s funding – or around £100bn – comes from institutions, who may think twice following the Moody’s downgrade, and the wholesale markets, which remain effectively closed. Without funding, mortgage lending will dry up. “To the extent that funding is restricted, it will restrict our ability to lend,†Nationwide chief executive Graham Beale told the TSC. The BSA’s Adrian Coles reckons “it is quite conceivable that lending will fall this year†as funding evaporates.

DRY UP - EVAPORATE hard to see how there can be so much denial.

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The Nationwide are clearly attempting to strengthen their balance sheet. They are increasing their rate on their mortgages and lowering their rate on savings. Is this because they will have to hoover-up the failing mutuals (WB first then Chelsea et al) to the bequest of the govt?

It's just because the government are screwing them. Both by unfair competition (pouring money into bust banks) and by direct theft (the prudent being required to pay for the reckless).

In a free market, Nationwide really would have been in a position to "hoover up", but even more so our retailers who have dabbled with banking (like Tesco, Sainsburys, M&S, etc) and "try anything" capitalists like Richard Branson would've had a once-in-a-lifetime opportunity to kick-start new businesses.

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The Nationwide are clearly attempting to strengthen their balance sheet. They are increasing their rate on their mortgages and lowering their rate on savings. Is this because they will have to hoover-up the failing mutuals (WB first then Chelsea et al) to the bequest of the govt?

What effect will this have on the amount the BS sector will contribute to mortgage lending?

The huge hike in fixed rates by one of the biggest lenders is big news, and very bearish. Surprised there isn't more being made of it on here.

Higher interest rates will mean lower prices!

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What effect will this have on the amount the BS sector will contribute to mortgage lending?

Their ISA savings rates are now complete rubbish (~1%). I've moved my ISAs to Halifax for 3% instead.

I have sympathy with NW but I'm not going to subsidise them by £1k per year in lost interest.

It's all down to government distortion. There is no free market in savings anymore.

VMR.

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Recently put money into a Coventry Bond that pays 4.0%, (just over 3% after basic rate tax), till Aug 2010.

Insane that 1 year ISA Bonds pay less despite the supposed tax break.

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