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Northern exposure

Yorkshire Building Society became the latest lender to launch a flexible offset mortgage account to compete head-on with the likes of Woolwich and Intelligent Finance.

The move, just days before it announced record annual results on February 12, was accompanied by its claim of being the first building society to launch an offset account allowing borrowers to combine their savings and borrowings.

Yorkshire, the third-biggest building society in the UK, says the offset lets borrowers get higher interest on their savings. It also allows penalty-free underpayments and overpayments, daily interest calculations, drawdown facilities and does not have a minimum savings balance.

It estimates that within a year its offset product will account for quarter of all its mortgage lending.

Yorkshire&#39s intermediary team is now promoting the new product to brokers and offering them what it says are “very attractive” procuration fees.

General manager marketing Iain Cornish says: “Our intermediary account team is explaining to brokers how the product is a financial planning tool which can help with the likes of tax planning.”

It seems to be winning over brokers, with Mortgage Intelligence managing director Sally Laker saying: “The way it puts savings and investments in different pots makes it easier for brokers to explain how it works.”

This is the latest from a building society which prides itself on a modern approach, including investment in information technology to create systems to allow it to launch new products like the offset.

Yorkshire says it has spent around £20m rewriting its core systems and is now looking to sell IT to rivals as part of its drive to diversify from its core business.

Cornish says: “We have been developing new core savings and mortgage systems over the past three to four years in a joint venture with Hewlett-Packard. We want to market our systems to other lenders and are doing feasibility studies with about two to three.”

Yorkshire also says it is constantly looking at new product areas and the next one in the pipeline is equity release, set to be launched some time after May this year. Cornish says: “There is a demand for this as a lot of people need to release equity to provide for later life. We are launching a product with safeguards.”

But it is cautious how it wants to diversify and does not launch itself blindly into high-risk markets like remortgaging. “We have a lower than average share of the remortgage sector as we see it as volatile. We look for quality of growth as well as sheer volume,” says Cornish.

It also has a policy of working with other mutuals – the most obvious example being its branch-sharing initiative launched last year with the UK&#39s second-biggest society, the Britannia.

Yorkshire now hopes to get others involved in this, with the ultimate aim of sharing with all the UK&#39s building societies.

The business strategy appears to be paying off. Last year&#39s profits rose by 4.3 per cent to £67.7m from £64.9m in 2000 and gross mortgage lending remains at the record level of the year before at £2bn.

It says its commercial success partly stems from its commitment to mutuality and giving members their say. Members&#39 panels have been set up to give everyone a chance to offer feedback, directors hold question-time sessions around the country and it has recruited a member to the board as a non-executive director.

Looking at the wider mortgage market Yorkshire says it welcomes the FSA&#39s moves to regulate mortgage advice but warns of the cost burden being passed on to the public.

Cornish says: “It makes sense for intermediaries to be regulated but eventually the customer will have to pay.”

He is more positive about the outcome of the polarisation review, commenting: “The polarisation debate needed to take place. A second tier of advisers, not quite as qualified as IFAs, should be able to sell simple financial services products.”

Despite reviews and regulation altering the face of financial services Yorkshire feels it is striking a happy balance between a cautious mutual putting the interests of members first and a modern lender determined to grow in the 21st Century.


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