SOCIETYNo. 50 | Winter 2018

matters

Ringing in 150 years of the BSAWhat’s on the agenda in 2019?

Savings for life InnovationFor people, not shareholders

page 6 page 14

The reality of saving as a parent

Open Banking: Opportunity or threat?

Proud to be on your high street

page 12

Housing for all

pages 10 & 11

Building on the Bank of Mum and Dad

Society Matters

contents

Another great year for the building society sector! Consistently winning awards for outstanding mortgage and savings products, helping the underserved find a right-fit mortgage and giving savers millions more than if they had saved with a high street bank.

opinion 3Reflecting back; looking forward

150 years 5150 not out: Introducing the BSA’s 2019 themes

innovation 6The digital mutual: three fintechs looking to innovate financial services

Five early lessons in life under 8 Open Banking

for people, not 9 shareholders An update on push payment fraud

housing for all 10Building on the Bank of Mum and Dad report

savings for life 12The Lifetime ISA: a success 18 months on?

The reality of saving as a parent

for people, not 14 shareholders Leek United: Proud to be on your high street

housing for all 15We need to unlock funding to combat unaffordable housing

diary 16

Hello and welcome to the winter edition of

Meanwhile the BSA’s independent Bank of Mum and Dad report caused a fair bit of debate when it was launched at the House of Lords

in November. Hopefully increasing innovation will help more young people onto the property ladder in the process (P10-11). The first BSA Digital Mutual Conference was a huge success, attendees enjoyed forward-thinking talks about digitisation and Open Banking from some of the most dynamic fintechs in the market (P6-7).

Looking ahead, 2019 is already looking like a cracker: the BSA celebrates 150 years since its establishment (you might have noticed our tweaked logo on the cover as our nod to the occasion!)

It is interesting to take stock of a dizzying number of years in the industry, but it is also important – and more interesting - to look ahead at how our sector will continue to help real people with real dreams and challenges in the coming years.

The next four editions of Society Matters are therefore dedicated to the BSA’s forward-looking 150th year themes: Housing for All, Savings for Life and For People Not Shareholders. Innovation will play the part of the golden thread, running through all the themes and being the catalyst to their success. Articles throughout this edition follow the

themes, with more on the BSA’s 150th on pages 3, 4 & 5.

Finally, we wouldn’t be celebrating such a milestone without the great work that our mutual members do each and every year, so thank you for all that you do… here’s to the next 150.

The spring edition will be landing in March. In the meantime, I’m off to eat an entire cheese board and get festive, and I hope you do the same. Merry Christmas and a very Happy New Year!

AMY HARLANDSociety Matters Editor

Society Matters is a publication of the Building Societies Association – ISSN 1756-5928.

The views expressed by authors in this magazine are not necessarily those of the BSA.

Chief Executive: Robin Fieth robin.fieth@bsa.org.uk

Editor: Amy Harland amy.harland@bsa.org.uk

BSA, 6th Floor, York House, 23 Kingsway, London, WC2B 6UJ www.bsa.org.uk

Designed by: Whatever Design Ltd. www.whateverdesign.co.uk

Printed by: Trident Printing, www.tridentprinting.co.uk

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welcome

By ROBIN FIETH, BSA Chief Executive

Reflecting back; looking forward

As we approach the 150th anniversary of the founding of the BSA, appropriately in a pub in Snow Hill, London (recalling that Ketley’s Building Society was founded in 1775 in a pub in Snow Hill, Birmingham!), it seemed a good time to reflect back on those early days and to look forward. In a sense, this is a dose of my own medicine. I often talk to Building Society groups about using our past as the inspiration for our future….

Writing a first history of the BSA in 1915, E Naylor described the Association as being the “centre of earnest work for

the improvement and protection of Building Societies”. He continued, “had it not been for the struggles of the Association, there is little doubt that Building Societies as we know them would not now be in existence, but would have been merged in some kind of Joint Stock Company scheme”.

Over 100 years later not much seems to have changed – and in the same breath everything

seems to be changing with increasing speed. We don’t talk about the “struggles” of the Association. And we do seem to have seen off the threat of the joint stock company scheme. Although the demutualisations of the 1990s were significant, we retained sufficient critical mass to build to the position today, where building societies are writing more than one in three new mortgages and are steadily taking market share, despite all the competition from established and start-up banks.

Back in 1869, the BSA was founded as a response to attempts by the government of

the day to introduce legislation detrimental to building societies by the back door. The legislation in question was to take away the exemption from Stamp Duties, which building societies had enjoyed from the passing of the Friendly Societies Act in 1836. The first attempt in 1855 succeeded in the House of Commons without the knowledge of any representatives of building societies, but was stymied in the Lords. Several attempts followed, eventually succeeding in 1867, tucked away as the tenth clause in an Inland Revenue Bill dealing with expenses of prosecutions, Distillers’ Bonds and Methylated Spirits.

SOCIETY matters

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opinion

So on 26 February 1869, a meeting of Secretaries and Officers of Benefit Building Societies held at Salter’s Hotel, King’s Arms Yard, Snow Hill, London resolved to form the Building Societies Protection Association with the object of protecting and extending the interests, privileges and advantages of building societies. Among the Association’s first campaigns was for a new Bill consolidating existing Building Society Acts. Drafted by a BSA sub-committee, the Bill was introduced into the House of Commons in May 1870. Although the Bill ultimately failed, “very important advances had been made in educating Members of Parliament, reconciling differences of opinion and making it clear that Building Societies were now of such vast importance, that legislation applicable to Friendly Societies generally could not be applied to them, and that they must be dealt with separately”. A Royal Commission followed and, eventually the 1874 Building Societies Act resulted.

Rolling forward to 2018, the BSA’s role remains substantially unchanged. Our purpose is to champion our sector and support all our mutual members. In championing the sector to politicians, officials, regulators and the media, much of our effort is in educating these groups of stakeholders about the vast importance of building societies to the future of the UK financial services sector. As the post-crisis period demonstrated so clearly, if there hadn’t been a strong group of customer-owned building societies, there would not have been a mortgage market in the UK, much as there wasn’t an SME finance market. Healthy ecosystems rely on biodiversity and financial services is no different. Building societies, credit unions and the rest of the

financial mutual world bring vital competition, different business objectives and real resilience to a sector that would otherwise be completely dominated by large shareholder-owned businesses.

Shareholder-owned business models have come to dominate conventional thinking among politicians, officials and regulators to such an extent that the need for education has arguably never been greater.

Hence the BSA’s campaigns for legislation and regulation that is both proportionate to size and complexity, and appropriate – working with the grain of the business model, not trying to force a customer-owned mutual model into a shareholder-owned framework.Hence also our campaign with all major political parties to recognise the massive contribution the broader co-operative and social enterprise economy makes to our nation. A recent report from Social Enterprise UK, sponsored by Nationwide Building Society and Co-op Group sets this out: the UK’s 100,000 social enterprises employ two million people and contribute £60 billion to GDP. The Building Society sector alone has 25 million savings and borrowing members, provides a third of new mortgages and has helped

750,000 first time buyers into their homes since the financial crisis. We employ 40,000 people, mostly outside London, and are proud to contribute almost £1 billion a year in taxes. According to reddit.com, the combined 2018 UK tax contribution from Amazon, Starbucks, Google and Facebook was just £52 million.

So as we approach 2019, and the 150th anniversary of that momentous meeting in Snow Hill, the need for the BSA remains as compelling as it was to James Higham, the BSA’s first Chairman (1870-1883). In times of political and economic uncertainty, rigorous regulation, rapid technological development and intense competition, we remain as a voice dedicated to championing building societies and contributing to the broader financial mutual and social enterprise economy. We remain dedicated to supporting all our mutual members as they navigate their own markets, pursue their individual strategies and embrace the fourth industrial revolution. And we look forward to doing so for many years to come so that future generations can benefit from building society membership, saving for their lives, buying their first and subsequent homes.

2019 will be an exciting time at the BSA. Our 150th Anniversary Conference will be at the Queen Elizabeth II Conference Centre in Westminster, bringing mutuality to the heart of government. We will be running a series of events throughout the year under our 150th Anniversary badge. There might even be a large birthday cake at the BSA on 26th February. We look forward to partying with a purpose!

opinion

“ The Building Society sector alone has 25 million savings and borrowing members, provides a third of new mortgages and has helped 750,000 first time buyers into their homes since the financial crisis.”

Next steps:

You can follow Robin on Twitter @bsaceo

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150 years

“ 150 years ago, decent housing for ordinary workers was difficult to come by. Roll forward to 2018/19 and for many it still is.”

150 not out – batting for the futureNext year’s 150th anniversary is a significant marker. One that makes us reflect positively on the heritage of building societies, their enduring social purpose and most importantly the future.

To mark the occasion, we are dedicating 2019 to celebrating the work that building societies

were founded for and continue to do. Expect events, research, ideas and insight all geared to supporting BSA members; finding opportunities to grow the understanding about mutuals and from time to time pushing the envelope to stimulate constructive wider debate about some of the big issues that UK society faces.

At their heart, the DNA of building societies has remained remarkably stable and consistent, not just for the past 150 years but right back to the pub landlord, Richard Ketley who in 1775 suggested that his regulars save collectively to build better housing for their families, just maybe instead of buying that last pint? And so the first known building society was born.

Today all building societies are savings and mortgage experts –

this is their primary business. They still operate for the long-term and for the benefit of their members. There are no shareholders here, just people with aims and dreams - to save for their futures or to own their own homes. By choosing a building society to save with or borrow from, ordinary people become a member-owner of that Society.

Some of the issues people face today look pretty similar to the challenges back in 1869, though the ‘why and the how’ has most certainly changed. 150 years ago, decent housing for ordinary workers was difficult to come by. Roll forward to 2018/19 and for many it still is. The dream of home-ownership, especially

amongst younger people, is a distant aspiration, as they struggle to save for a deposit.

It was in 1869 that two Wall Street financiers worked together to buy up as much gold as they could in the USA. They sold it for astonishing prices that led to the crash of the US gold market and ruin for many, eventually touching both sides of the Atlantic. It was also the first appearance of the term Black Friday. Today this has been transformed into a pre-Christmas purchase-fest but 4 in 10 adults have no savings to spend, whether on Black Friday goods or basic day-to-day financial resilience.

When the BSA was considering the themes to focus on in its anniversary year, building societies made it very simple with their clear purpose. So in 2019 the BSA will be focusing more than ever on:• Housing for all – a basic

necessity whatever the tenure

• Savings for life – life is for living and savings can help pave the way

• For people not shareholders – mutuality, customer-ownership and a ‘human face’

Critically, running through all three will be a fourth theme: innovation. Digital? Absolutely, but innovation is so much broader than digitisation. It is in the ‘analogue’ world too, around branches, communities, helping vulnerable customers and so much more. Of course, we value the convenience, access and speed that digital innovation offers, but this is only one of many ways our sector is innovating. At their heart, people still want to do business with people – it’s good to talk!

Next steps:

Keep up with the BSA’s 150th celebrations and events at bsa.org.uk

By HILARY MCVITTY, Head of External Affairs, BSA

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xxxxinnovation

By ROBERT THICKETT, Mortgage Policy Adviser, BSA

The BSA recently held its first dedicated event on digital innovation: The Digital Mutual. Over 90 delegates attended, with over half of building societies fielding representatives.

The digital mutual: three fintechs looking to innovate financial services

The Digital Mutual was the culmination of the BSA’s work over the last year to engage with building societies on digital innovation.

A key aspect of this has been assessing the potential impact of Open Banking, which came into play in early 2018. As part of this, the nine largest current account providers in the UK opened up their systems to safely engage with third-party firms.

With a new breed of account information and payment initiation service providers coming into the market off the back of Open Banking, this has the potential to transform financial services - including savings and mortgages.

Three of these firms - Bud, Ecospend and Openwrks - spoke at The Digital Mutual event.

The Financial Conduct Authority has licensed all three firms and they are looking to shake up the way consumers understand and use financial services.

Welcome to the new wave Bud was set up three years ago and is already working with large banks like HSBC and First Direct. It has also won a Government contract working with HM Treasury on a rent recognition programme.

Alan Walsh, who heads up networks and partnerships at Bud, says that simply put Open Banking will use customer’s own data to provide insights to help serve them better.

“It can be as simple as pointing out that a user is spending 35% more on utility bills in their area compared to the average, then connecting them to a utility switching company without leaving the app,” he says.

Openwrks has also been going for three years. The firm has produced a number of tools to help people to share their banking information with companies they trust.

“That information is then provided to a mortgage firm or debt management firm to better understand their situation and deliver better product and services,” says its CEO and co-founder Olly Betts.

Ecospend has been going since December 2017 and its app, Adzuki, plugs into a user’s online calendar and historical transactions, using the data to make forecasts, provide advice or ring-fence money for unexpected expenses.

“The key is that the software is intuitive and requires little or no input from the user,” says Ecospend’s managing director William Burton, “so we can overcome the general apathy towards forward financial planning.”

Rushing in would be a mistakeThat said, from a customer point of view, little seems to have changed almost a year on from the introduction of Open Banking.

Walsh says that a few thousand people are using its services now, and he predicts that there won’t be mass adoption until around 2020.

“But the possibilities Open Banking bring will create that inevitably,” he says.

Burton argues that given the work still to be done on Open Banking and consumer distrust about banking IT in general following major failures over the last year, a slow rollout is not a bad thing.

“Rushing something like this would be a mistake,” he says. “It could ultimately lead to customer mistrust and potential widespread fraud or data loss which would be catastrophic for the whole project.”

Customers are already using Openwrks’ technology to securely share their financial information, but Betts says that people using its services do not feel like things have changed.

“This won’t be something that will transform how we behave as consumers,” he says. “What it means is more personalised, faster decisions and a better understanding of customers so we can all access better financial products and services.”

Betts points to Openwrks’ connection with a firm called Fair Way Forward, which seeks to help people budget and manage their finances.

“For people in a distressed situation you can unleash the full power of Open Banking,” he says. “Within a few minutes, they can understand how much their life is costing them, build a realistic budget and agree on a flexible repayment plan for their debts.”

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innovation

The digital mutual: three fintechs looking to innovate financial services

The next Kodak or new Netflix?In terms of how incumbent firms like building societies will be impacted by this type of data sharing, Walsh says that whether it’s an opportunity or threat will depend on how building societies react to it.

“It creates a new distribution channel to sell your products, distributed by traditional competitors,” he says. “But if you aren’t in that space, it could quickly become fatal.”

He points to Bud’s own data, which shows that people are interested in simpler user experiences rather than engaging with a specific brand.

“If your brand is not part of that simpler user experience it runs the risk of death - like we have seen in so many other industries, ranging from Netflix v Blockbuster and the Kodak moments,” he says.

Ecospend’s Burton argues building societies could and should be seen as a trusted voice in the Open Banking debate. He adds that they should utilise this trust to build Open Banking

solutions that benefit their businesses and - most importantly - their customers.

“Fintech companies are great at building fancy tech but sometimes that technology is not answering a real customer problem,” he says. “Building Societies and the BSA as a whole are in a great position to canvas their customer base and find out what customers really want.”

Who building societies partner with will be vital.In terms of how these new types of fintech companies will transform how we get the best savings product or advice about a mortgage in 10 years’ time, there is general agreement that the days of consumers having to search for the best deal are at an end. The best deal will come to them.

“Platforms like Bud will detect when you should switch mortgage, based on the changes in your circumstances,” says Walsh.

“You have a pay rise and your circumstances change, an algorithm will notify you not only that you could be getting a better deal, but will identify that deal and then automatically switch you to that provider, with your consent.”

Betts agrees while the manufacturers of products will be similar - banks and building societies - what will be different is how customers are acquired and how products are originated.

The key challenge for product manufacturers, he says, will be deciding who they partner with and how they manage that.

However, Burton says that while robo-advisor tools are likely to become ubiquitous in the future, ultimately customers value trust and transparency over everything else.

“Advice about savings and mortgages will be delivered through the medium that offers the most trustworthy and transparent advice,” he says.

“Whether that’s through virtual reality headsets or sitting down for a coffee with your local building society manager, who potentially might be a robot.”

“ If your brand is not part of that simpler user experience it runs the risk of death.”

Next steps:

You can keep up with all the latest BSA events, and sign up for notifications at bsa.org.uk/events

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innovation

Five early lessons in life under Open Banking

By DAVID GARDNER, Partner, TLT

The changes since Open Banking’s implementation in early 2018 provide the tools for software developers to build new apps, services and solutions that plug into online banking platforms and create the potential for innovative services that make use of customer data.

An early assessment of ‘life under Open Banking’ revealed that banks and building societies are facing an interesting balancing act in driving

innovation, fostering customer confidence and managing the technical challenges and regulatory risks presented by the changes.

At the same time, news stories of data losses, privacy breaches, fraud and cyber-attacks continue to make headlines. With this backdrop, the technical challenge of securing customers’ data and arousing sufficient consumer confidence in Open Banking present considerable hurdles to overcome.

Early lessons include:1. Disruption: The disruption for established banks and building societies will continue, as newer bank and non-bank players seek to gain a foothold in the market.

In the longer term, companies like Google, Amazon, Facebook and Apple (GAFA) are looking at what Open Banking means for them. According to our latest research report ‘Opportunity Knocks – the future of Open Banking’, GAFA is the biggest perceived threat by financial services companies. They have the customer base, the budget and the data analytics tools to make further moves into the financial services market through their existing platforms.

This is likely to increase the incidence of non-bank providers inserting themselves between the customer and their bank or building society, further disrupting the traditional banking service model.

2. Collaboration: While there is natural competition between banks, building societies and fintechs, collaboration between market players can yield positive results.

Collaborations have been successful where each participant offers different strengths. For example, banks may have a large customer base and a trusted brand, whereas a fintech may possess new analytics technology and the agility to deploy rapidly.

3. Choice: Early indications suggest consumers seek a developing marketplace that can offer an increasing choice of products and providers, and the power to design the banking experience they want.

However, the picture is far from clear. Early adopters of current accounts provided by new mobile-only entrants are the most satisfied with their banking experience. However, current account switching remains low, suggesting these new players have a lot more work to do to persuade most customers to make the change from more traditional providers.

4. Consumer confidence: Initial publicity and promotion of Open Banking has been limited and often uninspiring, for example arriving in the form of new terms and conditions.

It has also had to compete for consumers’ attention against headlines about the risks of sharing data with third parties and, most recently, record fines for Facebook from the UK Information Commissioner’s Office following the Cambridge Analytica scandal.

Larger banks and building societies, particularly the CMA9, have also been primarily focused on preparing themselves for the requirements of Open Banking and PSD2 (among other regulatory changes).

The industry will need to do more to win consumer confidence in Open Banking.

5. Opportunity: Despite the challenges highlighted above, Open Banking remains a huge opportunity for the bank or building society that (alone or in collaboration with fintechs) can be the first to release a “killer app” to realise its true potential.

While innovation cannot be rushed, there is pressure to innovate quickly to secure early market share ahead of the competition.

Next steps:

tltsolicitors.com

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culturefor people, not shareholders

An update on push payment fraud

Five early lessons in life under Open Banking

Banking & Finance Litigation specialists Louise Power and Rachel Elgar provide an update on proposals for dealing with push payment fraud.

“ The PSR established a steering group, comprised of industry and consumer representatives, to lead the development of a voluntary scheme to reduce the occurrence of push payment fraud and to lessen its impact.”

1. https://bit.ly/2dQTk2J

What is push payment fraud?Push payment fraud involves a fraudster somehow persuading a consumer to transfer from their account (i.e. to ‘push’) money into the fraudster’s account. Common examples include:

• A fraudster poses as a solicitor and asks the consumer to transfer funds for a property transaction; and

• A fraudster poses as a builder to receive a large cash transfer.

In most cases, the customer will notify the bank (or any other ‘payment service provider’) only after the payment has been made, by which time the fraudster will have made off with the funds.

Recent press coverage reports that responses from within the financial services industry are inconsistent (i.e. some organisations more readily reimburse victims than others). There have therefore been calls for changes to legislation and regulation.

Combatting push payment fraud – the story so farIn a ‘super-complaint’ submitted to the Payment Systems Regulator (PSR) in September 20161, Which? argued that consumers do not receive sufficient protection from push payment fraud, compared to other types of fraud - for example credit card or direct debit fraud. Which? suggested that regulation should be changed so that:

• Provided a customer had not been fraudulent or grossly negligent, they are reimbursed by the financial institution (even where no fault is attributed to said institution); or

• The consumer is only protected in circumstances where the bank or building society has fallen short in some way – for example, failure to put in place proper arrangements for managing the risks associated with fraudulent payees.

In February 2018 the PSR confirmed plans to better protect victims of push payment scams by implementing a scheme that would make reimbursement contingent on the actions of the banks both sending and

receiving the funds when a push payment fraud occurs. The PSR established a steering group, comprised of industry and consumer representatives, to lead the development of a voluntary scheme to reduce the occurrence of push payment fraud and to lessen its impact.

Contingent reimbursement – draft industry codeThe steering group has now published a draft contingent model code. The code is underpinned by the following core principles:

• Incentives for those with the ability to effectively prevent push payment scams and reduce their impact.

• Consistency of outcomes for parties with the same circumstances.

• Leverage of existing and future initiatives that are likely to be effective at preventing and helping respond to push payment fraud.

• Adoption by all financial organisations that have an

element of control over preventing and responding to push payment scams.

• No contingency on the recovery of funds.

• No adverse impact on financial organisations’ ability to make goodwill payments.

• No adverse impact on commercial development of further consumer protections.

• The scheme should be developed in such a way that it is capable of becoming part of the relevant considerations that FOS can take into account when determining outcomes of a consumer complaint about push payment fraud.

The code also includes proposals for reimbursement depending on whether the bank or building society and the victim have met the specified levels of care expected of them.

Next steps:

Learn more at walkermorris.co.uk/publications/push-payment-fraud/

By LOUISE POWER and RACHEL ELGAR, Walker Morris

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By ANDREW GALL, Chief Economist, BSA

First-time buyers are becoming increasingly reliant on the help of parents or grandparents to get them onto the housing ladder, but how can financial services providers respond to facilitate this growing demographic? The BSA commissioned an independent report to investigate; authored by building society stalwart Dick Jenkins and economist Bob Pannell, and launched in the House of Lords in November.

Our broken housing market is affecting first-time buyers“Young people are struggling to get on the housing ladder.” It is an all-too-familiar phrase used at an alarmingly increasing rate.

The number of first-time buyers has grown since the crisis, supported by various Government schemes.

But raising a deposit has remained the consistently biggest barrier to homeownership for the past 8 years1, according to data from the BSA’s quarterly Property Tracker survey. Before the financial crisis, a first time buyer getting a mortgage had a deposit of about 60% of their nominal income if they were buying by themselves, or about a third of their joint income if they were buying with a partner. In the last two and a half years, the ratio has averaged almost 90% of a single first time buyer’s income, and half of joint buyers’ incomes.

A recent L&G report revealed that almost a third (27%) of first-time buyers in 2018 would depend on the help of parents or grandparents to bridge the gap for their deposit in one way or another. It is becoming so mainstream a method of buying a first home that ‘the ‘Bank of Mum and Dad’ is considered one of the UK’s top-ten mortgage lenders, even by conservative estimates.

What is already being done?As might be expected a very high proportion, 92%, of building societies strongly agreed that it is part of the distinct social purpose of building societies to help young households into homeownership – and there is a lot of work already taking place in this area.

Many building societies have been keen participants in Government schemes to help people to buy their first home, including lending on shared ownership and Help to Buy. And societies help first-time buyers in various ways beyond this.

Building societies already offer a raft of innovative products to support the Bank of Mum and Dad: 87% will accept gifted deposits, 59% will accept a deposit from family members as security and a third will accept a charge over the family’s property to ease affordability barriers. Furthermore, family offset mortgages are offered by 10% of building societies.

However, with the reliance on the Bank of Mum and Dad expected to grow in the coming years, more needs to go into facilitating would-be homeowners, especially as the Help-to-Buy scheme is withdrawn in 2023.

What does the report recommend?The report centres its findings around three areas of recommendation:

• Promotion – improving communication and knowledge

• Product extension and innovation

• Regulation and Government action

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housing for all

PromotionThe report encourages potential first-time buyers to “Go on, ask”, as there is evidence that many aren’t aware of all the options that are open to them. Clearer, jargon-free information and a shared vocabulary on BOMAD products could be provided by lenders.

As well as reaching out to first-time buyers and their families via a range of channels, including social media, some sort of awareness campaign for the broker community could help to demonstrate what societies can offer to potential borrowers.

Product extension and innovationThe second recommendation is for lenders to develop more of the expertise to deploy the solutions that already exist. Lenders should also continue product innovation, with many building societies already having shown themselves adept at creating new products.

A key area for innovation is to make the features more flexible: guarantees or charges over parental property that fall away after a period of time, for example. This is likely to fit better with the time when they young person needs the support, and free up the parents’ resources to help siblings. More flexibility could also help to deal with fluctuations in income over the life of the mortgage.

Given the challenge for first-time buyers in raising a deposit, loans above 95% loan-to-value (LTV) ratios could be revisited, within appropriate parameters.

The higher risks associated with higher LTV lending, are well appreciated by the societies surveyed. But under certain circumstances,

such as parental guarantees, set salary progression in certain careers, or a likely large inheritance, lenders might be willing to lend up to 100% LTV. Technological advancements are also likely to make underwriting more accurate in the years ahead.

There is an evident appetite for 100% LTV mortgages: recent data revealed that 48% of people think re-introducing them to the mainstream would be a good idea2, though launching such products is always dependent on an individual lender’s risk appetite.

The report recommends lenders monitor developments around private sector equity loans, especially as the Help to Buy Equity loan changes focus. Private sector organisations could well develop similar products, attracting older households’ wealth and then using it as equity loan finance for unrelated first-time buyers.

Regulation and Government actionThe final set of recommendations look at whether the Government or regulators could reduce obstacles. One example is the mortgage affordability stress testing measures set by the Bank of England’s Financial Policy Committee. Although stress testing is an important component of responsible affordability calculations, the current parameters risk freezing out aspiring homeowners who could afford repayments, and contrasts with the general public policy objective of supporting homeownership.

The report suggests that fiscal incentives should be improved, such as exploring whether targeted inheritance tax exemptions and Stamp Duty Relief could help wealth to be transferred.

What next?Clearly, there is still a lot of scope for the UK’s mums, dads and grandparents to help their children onto the property ladder, and there is of course the issue of people who don’t have the support of family members, but who also quite reasonably aspire to buy their first home.

The report demonstrates that building societies have already been flexible and innovative in helping first-time buyers since the financial crisis, and are well-placed to do more.

Key stats:

70% of people think that the difficulties young people

face buying a home of their own is one of the UK’s biggest issues.

86% of people want to own their own home, but

many think this won’t be a reality.

59% of aspiring first-time buyers expect the Bank

of Mum and Dad to support them onto the housing ladder.

1. www.bsa.org.uk/propertytracker2. https://yougov.co.uk/opi/surveys/results#/survey/978d8c55-ed76-11e8-9dbc-97e74ebd175c All references can be found in the report: Intergenerational Mortgages: Building on the Bank of Mum and Dad, unless stated above.

Next steps:

You can read the full report or request a hard copy at: www.bsa.org.uk/BOMAD

Building on the Bank of Mum and DadSOCIETY matters

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housing for all

savings for life

The LISA offers a government bonus of 25%, up to a maximum of £1,000 per year upon maturity – that’s once the account holder turns 60 or puts

down a deposit on their first home.

Skipton Building Society was the first provider of the LISA. Below the Society shares what made it an attractive proposition and appetite for the product 18 months on from its launch.

“Since 1853, Skipton has remained committed to its founding purpose of helping people to own their own homes. Because of this commitment, we were keen to offer UK savers the Cash Lifetime ISA, becoming the first provider to do so in June 2017.

“Since launching our Cash Lifetime ISA, over 126,000 people have opened an account with us, with a collective balance of over £580million. This innovative product is a valuable lifeline to young people wanting to get on the housing ladder.

“This year, we have been thrilled to see the Lifetime ISA used to fund savers’ house purchases for the very first time, helping over 2,000 LISA customers to get the keys their first home since June. We have also developed a range of mortgages, available exclusively to LISA customers, and offer £250 cashback on any Skipton Mortgage taken by a LISA customer.

“For those LISA savers who are a little further away from having their deposit, we’re focussing on helping to support them in maximising their savings by providing guidance. When the time does come to take that exciting first step onto the housing ladder, they feel well prepared and can focus on enjoying the result of hard work paying off.”

Newcastle Building Society and Nottingham Building Society have recently introduced the LISA into their product ranges:

Stuart Miller, Customer Director at Newcastle Building Society said: “Helping people own their home and plan for the future is core to our Society’s purpose, and the Lifetime ISA helps both these sets of customers.

“Encouraging and rewarding personal saving is an important step in addressing a culture of easy credit and consumer debt that has become prevalent and ultimately reduces the ability of individuals, couples and families to save and plan for their future.

“With Help to Buy ISA coming to an end in 2019, we’d expect that demand for this type of account will continue to grow due to the generous government bonus.”

Jenna Mckenzie-Day, Senior Product Manager for Savings at Nottingham Building Society said:

“We understand the challenges facing first-time buyers saving for a deposit, alongside the challenges of putting money aside for later life. Saving into a Lifetime ISA will help first-time buyers save their deposit quicker, or put down a larger deposit. Savers in our heartland can open an account in-branch, with an online launch scheduled for early 2019.

“We also search the whole mortgage market to find members the right mortgage for them, potentially offering even greater savings. This service will be free to Lifetime ISA savers.

“We also have a responsibility to help members save and plan for their long-term future. As we are living longer, a Lifetime ISA is a simple way to boost retirement savings. It’s a genuinely beneficial savings product which we are proud to have invested in.”

Next steps:

More information on the LISA is available at the above building societies or on the gov.uk website: https://bit.ly/2l7fAcu

The Lifetime ISA (LISA) was launched as the antidote to the nation’s saving woes, specifically aimed at those looking to buy their first home or who don’t contribute to a pension scheme…or would like to have a separate pot for later life.

The Lifetime ISA: 18 months on is it a success?

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SOCIETY matters

Nationwide research found that four fifths (81%) of parents are saving for their

children, putting aside an average of £33.72 a month. By the time their children turn 18, parents expect to have £7,000 saved, but one in 20 (5%) aim to give their children £10,000 or more, while one in six parents (14%) say they will have £1,000 or less saved. Interestingly, saving is taking place across the salary range, with more than three quarters (77%) of parents earning £15,000 a year or less still managing to put money away for their offspring.

While saving for their children, parents often have ideas of what the money will be spent on. While half (50%) say they are trying to create a nest egg for their child’s future, more than two in five (45%) are saving to help

their child through university, a third (35%) are saving to help with a deposit for their first house and three in ten (30%) are putting money away to help buy their first car. However, high on the list of parents’ biggest concerns is the view that their child will fritter the money away and not use it for their intended purpose later on.

Our research shows that while most parents save, around a third (32%) confess to having

dipped into their children’s savings in an emergency. You might think it would be those on lower incomes dipping into their children’s savings, but while more than two fifths (45%) of those earning less than £15,000 a year have withdrawn money in an emergency, around a quarter (24%) of those earning £75,000 or more have also done so. Many households are struggling with the rising cost of living, which has led to some saying they are putting off saving for their children as they are worried they may urgently need the money in the future.

Creating a savings habit is an important life skill, but our research shows that one in four parents (25%) have never discussed the benefits of saving with their children, which is perhaps a contributing factor to

parents’ concerns about how their children may spend their money once they reach 18 years old.

However, it does appear there is a generation gap, as the older parents are, the more willing they are to explain the importance of saving for the future, with only one in 20 (5%) of those aged 55 saying they hadn’t spoken about the subject, compared to just under half (46%) of those aged 16-24. By encouraging children to save, even if it’s a few pence on a regular basis into a piggy bank, parents can help develop a savings culture that will benefit their children, particularly when they become adults and have children of their own.

Next steps:

For more information please visit nationwide.co.uk

Even before a child is born, parents are thinking about their child’s future and what their life may become. Will they be a doctor, saving people’s lives, or maybe a lawyer, fighting for justice for victims? No matter what a parent’s ambition for their child, one common aim is that they want to give their child the best start in life. For many this involves putting money aside on a regular basis to provide their child with a nest egg.

“ Creating a savings habit is an important life skill, but one in four parents (25%) have never discussed the benefits of saving with their children.”

By TOM RILEY, Director of Savings at Nationwide Building Society

savings for life

Research highlights the reality of saving as a parent

SOCIETY matters

13WINTER 2018 | SOCIETY matters

New technology and the internet – in particular, the development of online banking – are now part of everyday life, transforming the

way we all do business.

At Leek United, we look at things a little differently; the community is at the heart of everything we do…and not just the ‘virtual community’.

We’ve dedicated ourselves to a century-and-a-half of commitment to and support for the communities and town centres we work in.

Sadly, bank branch closures in those town centres have become all too commonplace in the UK’s local banking industry.

But we believe strongly that to give customers the service they deserve, we need to retain the face-to-face interaction they get in our branches, alongside the ‘interface interaction’.

In other words, the technology should enhance, not replace, great personal service.

Customer satisfaction surveys have shown that people continue to place great value on the sort of face-to-face, high quality service we’ve always offered.

And to us, that means we need to continue to have a real physical presence and play an active role in our local communities.

We have 12 established and trusted branches – each with its own dedicated Branch Manager

– across the four counties we operate in: Cheshire, Derbyshire, Shropshire and Staffordshire.

Maintaining this ‘physical presence’ for customers was one of the main drivers behind our recent ‘Proud to be on your high street’ campaign.

‘Proud to be on your high street’ is a celebration of us doing our best to make a real contribution to the town centres we’re a part of, commercially, socially and culturally.

We firmly believe that traditional values – and a visible high street presence – actually matter more than ever today, despite the growth of internet banking.

You only have to walk into any one of our branches to see the importance of the interaction between our staff and customers.

In a similar way to the ‘Proud to be…’ campaign, earlier this year Leek United encouraged savers and shoppers to quite literally put their money into its home town economy.

The Society launched a special savings account aimed at raising awareness of the importance of independent retailers in its own Staffordshire Moorlands heartland of Leek, where its Head Office is based.

Every pound that customers save in the ‘Totally Locally Leek’ Affinity Account helps to support the ongoing Totally Locally Leek campaign, which aims to ensure the town remains a vibrant place to live, work and shop – a community ethos closely aligned with the Society’s own.

Our main challenge is ‘relevance’ – to continue to be relevant to our members and customers so that they immediately reach out to us when they have a mortgage, savings or insurance need.

For example, we offer mortgage advice on the high street – something which has become increasingly rare today - via our Qualified Mortgage Advisers, available in each of our branches.

We’re always there for face-to-face customer engagement with a great, warm personal touch – and it’s that, coupled with the services we offer, which we believe makes us different.

“We’re here for people, not shareholders.”

Next steps:

To keep up with Leek United please visit leekunited.co.uk

Proud to be on your high street: why branches are front-and-centre for Leek United

It’s fair to say that a lot has changed in the 155 years we’ve been looking after the financial interests of people in the communities we serve…

By SIMON ROUND, Head of Branch Network, Leek United Building Society

“ ‘Proud to be on your high street’ is a celebration of us doing our best to make a real contribution to the town centres we’re a part of, commercially, socially and culturally.”

culturefor people, not shareholders

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SOCIETY matters

housing for all

Affordability is a recurring theme that has been progressively getting worse over recent years. It is now undeniable that prices and quality

have reached a level that can no longer be described as sustainable or just. That there is now an urgent housing crisis in the UK has quite rightly become an undisputed fact amongst politicians of all political persuasions.

As a result, policymakers have searched far and wide for a solution, from unlocking more brownfield land to threatening developers over ‘landbanking’. However, to many within the industry it has become clear that diverting away from unsafe equities and accessing greater funding levels will be the key to creating a fairer and more balanced property market for all. To this end, many have been turning to title insurance (a form of indemnity insurance which insures against financial loss from defects in title to real property) to ensure better results for lenders and borrowers alike.

Perhaps the clearest path to achieving this is more efficient and cost-effective mortgage approval processes. As industry professionals will appreciate, the entire mortgage lifecycle - including processing, underwriting, and closing - requires a large amount of documentation and can delay the entire process to the detriment of the transaction.

By eliminating the need for much of the due diligence required, title insurance can accelerate the process and enable purchasers to complete sooner.

The ability to fund pioneering architectural and environmental initiatives can also be aided by innovative insurance products. To create stable markets and decent living conditions, properties should be designed with the type of purchaser in mind. Likewise, where possible, eco-friendly units should be encouraged to minimise environmental impact and reduce running costs for the buyer.

However, due to issues around breaches of covenants, oversailing and easement issues, modernisation can frequently be viewed as being too risky, either increasing costs or halting funding altogether. Nevertheless, with the appropriate cover, such risk can be managed, and the cost of funding reduced.

In a similar vein, housing developments around existing retail centres must also be promoted to ensure a greater sense of community and belonging. The model used by Intu Properties has proved to be incredibly successful in this regard. Through deflecting risk so that developers can access cheaper funding, title insurance can prove to be useful when delivering better quality housing stock to buyers.

Furthermore, coupled with the better regulation of landlords, insurance cover can help improve the buy-to-let market through covering the loan originations, thereby reducing costs and increasing market size.

It is beyond doubt that bold action is required to tackle the housing crisis and it is encouraging that the government has already announced a series of strategies to aid supply. However, we cannot rely solely on a government-led approach to deliver the quantity and quality of housing required.

Lenders and developers must therefore utilise all the tools at their disposal to unlock the greater levels of funding required to help ease the housing crisis.

Next steps:

Learn more at titlesolv.com

We need to unlock funding to combat unaffordable housing A lack of affordability has been the scourge of property markets across much of the Western world, but no more so than the UK.

By CHRIS TAYLOR, Chief Executive, Titlesolv

“ Through deflecting risk so that developers can access cheaper funding, title insurance can prove to be useful when delivering better quality housing stock to buyers.”

SOCIETY matters

15WINTER 2018 | SOCIETY matters

Lending in later life15 January 2019, London

With people over 65 currently holding £1.5 trillion in housing wealth, and with mortgage borrowing in this age group projected to double by 2030, lending in later life has the potential to be a huge growth area for building societies in the years to come.

This one-day course is designed to upskill Mortgage Advisers to understand the wider implications and possibilities for customers looking to raise money in later life.

Open to: BSA members and associates

Cost: £450 per delegate (VAT exempt)

BSA Associates meeting17 January 2019, London

The objective of this event is to help BSA associate members understand what it is really like to work with building societies, the business conditions facing mutuals and how they are reacting to market changes.

It will also help Associates understand how they should tailor their approaches to BSA members in order to maximise their opportunities for working with mutual businesses.

Open to: BSA associate members

Cost: Free

Media training for senior executives29 January & 14 March 2019, London

The reputation of your society is one of your major business assets. Particularly in a crisis, the way that you handle the media can make the difference between enhancing your society’s reputation and losing it.

In the good times, communicating with the media is still one of the most effective ways of getting your message across to a large audience.

This one-day programme will give participants a framework to understand how to navigate the media.

Who should attend? The programme is aimed at non-executive directors and senior leaders in the building society sector. No previous media experience is necessary.

Open to: BSA members and associates

Cost: £800 per delegate (VAT exempt)

Includes course documentation, lunch and refreshments.

An introduction to treasury management6 February 2019, London

The objective of this course is to introduce participants to treasury management. It provides an overview of treasury operations within financial services, more specifically within building societies and within the regulatory environment. Following this there is an in-depth study of treasury operations, focusing on liquidity, wholesale funding, credit risk and financial risk.

Cost: BSA members and associates: £490 per delegate (VAT exempt)

Non-members: £590 per delegate (VAT exempt)

The cost includes course documentation, lunch and refreshments.

Local & regional building societies conference28 February & 1 March 2019, Celtic Manor, Newport

A key event in the building society calendar, the 2019 local and regional conference focuses on digital and innovation.

The conference, this year hosted by Monmouthshire Building Society will be held over two days with a dinner and allows plenty of time for networking and sharing of ideas.

Who should attend? The conference is aimed at NEDs, executives and senior managers from building societies and others working to support our sector.

Registration: Fees and registration options to follow.

BSA Annual Conference 2019Thursday 23 & Friday 24 May 2019, London

Our annual conference offers a great opportunity to exchange views and ideas with peers and wider industry contacts through our thought-leading keynotes, breakouts, exhibition floor and social events.

Conference venue Queen Elizabeth II Conference Centre, Westminster, London SW1

Dinner venue (Thursday 23 May) Victoria & Albert Museum, Cromwell Road, London, SW7

Full details will be published as the programme takes shape: bsaconference.org

Next steps:

The BSA events programme is regularly updated – for full listings please visit bsa.org.uk/events

Dates for your diaryKnowledge sharing and educational events for building societies, wider mutual organisations and beyond.

Register to attend the below events at bsa.org.uk/events

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SOCIETY matters

diary