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Beware the PLCs in sheep&#39s clothing

Good efficient mutuals, such as Nationwide, offer better long-term value than their plc competitors and the logic behind this statement is simple.

There is an inescapable difference between the economics of a plc and a mutual. If you are a plc, you have to balance the needs of your customers with the needs of your shareholders. Products and services are priced in order to make enough profit to enable the plc to pay shareholder dividends.

If you are a mutual, without shareholders, you can always put your customers first.

You may say that is all very well as a philosophy but where is the evidence that Nationwide puts this into practice?

On the mortgage side of the business, our borrowers have seen a succession of moves to improve the value of the products and services we offer them:

l Our standard variable mortgage rate has been consistently lower than most of our main high-street competitors for several years.

l We removed more than 25 standard mortgage service charges in 1998.

l We removed tied insurance products in 1999

l We stopped charging new borrowers a mortgage indemnity guarantee charge in 2000.

This year, we have done even more. In March, more than 500,000 existing Nationwide borrowers saw their interest rate reduce automatically by an additional 0.5 per cent with the introduction of our base mortgage rate – a strategy designed to move away from the typical market practice of buying new business at the expense of existing customers.

From May, we moved all our borrowers automatically from annual to daily interest.

Many of you may believe there is very little difference between our actions and those of our plc competitors. After all, any IFA will be aware that a number of plcs overtly claim to have introduced a much lower variable rate and to calculate interest on a daily basis.

However, get beneath the surface froth of marketing and promotional activity and we believe you will discover a stark contrast.

Halifax, for example, has not given any existing customers the benefit of its lower variable rate automatically – they have to apply for it. Neither has it given existing borrowers the benefit of daily interest automatically, it is only available on certain products.

At the same time, some plcs heavily promote their new lower variable rate and daily interest even though the reality is that many existing borrowers are still paying their higher standard variable rate and annual mortgage interest.

Many players still charge some new customers a Mig and still charge existing customers for a whole range of standard services that are free at Nationwide.

In many respects, some of the banks have been very clever in creating the illusion of being consumer-friendly. The creation of such an illusion means it must be confusing for borrowers to know whether their bank is a good lender to stay with or to choose if they are looking for a new mortgage. The whole philosophy behind Nationwide&#39s approach is based around fairness, better value and transparency. This strategy has served us very well in recent years.

We have listened to our members and we continue to believe that what customers ultimately want is a lender which treats them with integrity and fairness.

Nobody is treating people fairer than we are and that is a difference we will continue to underline through our actions. As an efficient mutual, Nationwide has the ability to genuinely put its customers first.

Compare our approach with those who are having to use confusion marketing to mask the reality of the plc profit motive.

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