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Mutual trends

Consolidation had become a distant memory until Nationwide’s takeover of Portman. If more lenders increase competition, then surely fewer lenders will have the opposite effect?

Not necessarily in this instance. A standalone Nationwide is far and away the biggest mutual and its link-up with the Portman will give it far more clout. Nationwide’s main weakness has been its intermediary offering and Portman’s expertise in this area – via The Mortgage Works – is strong. Portman has worked hard to develop a strong intermediary offering, which is a huge part of its attraction to Nationwide.

Both lenders offer “best buy” deals on a fairly regular basis. Nationwide manages to combine relatively low rates with reasonable fees although these have been climbing in line with the rest of the industry. Portman offers bargain rates with high fees.

But the cost savings to be made across Nationwide/Portman should enable the merged firm to offer a more consistently market-beating range. There should be a genuine rival to HBOS across a wide range. The only question is how long it will take and when the savings will make themselves felt.

There are also bound to be benefits on a smaller scale. Portman’s clients should benefit from daily calculation of interest. Portman borrowers a standard variable rate should see this fall, bringing it into line with Nationwide’s lower base mortgage rate. The high fees that Portman charges on some residential fixes may be tempered once it comes under Nationwide’s umbrella.

But while this alliance will bring benefits, ultimately it may not be so rosy. This takeover could sound the death knell of mutuality. It is hard to see how smaller mutuals will remain mutual after one as established as the Portman can be swallowed up.

There is also an argument that the mutual way of life – branches on every high street, staff knowing your name – is in general decline. If Nationwide/Portman is going to compete with HBOS, surely it will have to become less like a mutual – close branches, become more ruthless, introduce cost-cutting to all elements of the business? The mortgage world is a cut-throat one.

In the short to medium term, this consolidation is likely to mean more competitive mortgage products but in the longer term, I am afraid it will mean less in the way of choice.

Mark Harris is managing director of Savills Private Finance

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