Skipton Building Society is planning to merge with Chesham Building Society after posting a 189 per cent increase in group profits from £22m to £63.5m.
Group mortgage assets increased last year by £1.3bn to £10.7bn, mainly as a result of the merger with Scarborough Building Society in March 2009.
Money Marketing was first to reveal Skipton’s move to scrap the ceiling on its standard variable rate and raise its SVR from 3.5 per cent to 4.95 per cent.
Law firm Leon Kayes is investigating the legal implications of the move, which took effect from the start of March and will see the annual cost of a typical £150,000 repayment mortgage increase by nearly £1,500.
Skipton’s proposed merger with Chesham is expected to take place on June 1, subject to FSA and member approval
Chesham has three branches and £230m assets while Skipton has 89 branches and £15.6bn assets.
Skipton has committed to keeping Chesham’s branches for 12 months, after which they will be subject to the society’s ongoing branch review process.
There will be no compulsory redundancies among branch staff as a result of the merger.
Skipton group chief executive David Cutter says Skipton has achieved significant year-on-year improvements in its financial performance. But he adds: “Uncertainties remain regarding the economy, the Government’s finances, the impact of an historic quantitative easing programme and the distortions in the UK savings market. We therefore remain vigilant.
“That is why we announced steps, after the end of the financial year, which will enable the society to combat the challenges it faces in the current, exceptional economic environment – characterised by historically low interest rates and a distorted retail savings market.
“These steps include increasing our mortgage standard variable rate from 3.5 per cent to 4.95 per cent from March 1 and the announcement of 90 redundancies within the society. Mortgage broker Savills head of media relations Melanie Bien says: “Obviously, we want a thriving financial sector with building societies and banks posting profits rather than losses and not having to be bailed out by the taxpayer.
“But, even so, if you were a customer who thought you had a guarantee on your mortgage rate with Skipton, only to find out about these ’exceptional circumstances’, you would be annoyed that they were making all of this money. I think it will be difficult for customers to understand it.”