I am on the board of the Council of Mortgage Lenders and yesterday was our bi-monthly Executive Committee meeting. The agenda as always was littered with a raft of issues for debate, concerning lending, customers, arrears and possessions and government schemes designed to boost the housing market and get things moving again.
As I listened to the debate I couldn't help but feel that both the industry and government were perhaps slightly arrogant to think that if mortgage lenders simply open up the credit flood gates again, everything will be OK. Actually markets are won and lost on confidence and right now we the general public have been repeatedly told not to have any, so it is little surprise that we are spending less and putting off major transactions like moving home.
On the train on my way out of London I was particularly drawn to 2 articles in the Times. The front page headline read The Deepest Recession, a story all about the International Monetary Fund forecasts of our shrinking economy during this year; and a story on page 24 entitled Trust Me The Experts Here Don't Know Either. This came from a survey of 2,000 captains of industry, economists and heads of government at a World Economic Forum in Davos.
I reflected on the headline and have to agree that I share the views of the writer that captains of industry, economists and heads of government are usually wrong about the future.
How should we be feeling while the country wallows in the mire of recession? What can we do? Well I don't know, we all have our own way of dealing with things, but what I do know is that none of us can change what is outside of our control - neither can we change what we have already done; all we can change is what we do from this second onwards.
As Chief Executive of Saffron, it’s my job to listen to all of the experts and make the best judgement calls that I can – looking at the financial macrocosm and steering the building society through the storms. As an individual, however, it comes down to being sensible. All any of us can do is our best and, when we do, we Brits have a funny way of sorting things out.
For me though one thing is certain - I will pick and choose what I read or listen to from the media and only take note when it is something I can change!
Friday, 30 January 2009
Wednesday, 28 January 2009
Development can be a slow process
I am typing this entry into my blackberry memo pad, in my car, in the dark and parked on the MI motorway 2 miles north of junction 15A. I have been parked here now for nearly 3 hours.
Today had gone so well too; I have been in Leicester on an Achievers Academy event and had a really good day with the delegates. The academy is an initiative that we run with 6 other Building Societies; Teachers, The Hanley, The Ipswich, Leek United, The Loughborough and Market Harborough. It has been running for a couple of years now and each society puts on 2 delegates, who are hungry for development and have potential; we then put them through a series of pretty tough exercises to hone their skills. Coupled with this each CEO mentors delegates from other societies. This year I am working with Clare and Carole from Leek United.
The idea is to work with them between events and offer advice and coaching to help channel and stretch their development. It is great fun and very rewarding. Yesterday was a presentation skills training course in advance of a formal event next week, where all the delegates will have to present to a "dragons den" of CEO's - nasty!
I firmly believe that our people are what differentiates our service and therefore development for those who want it is critically important. Saffron Building Society is only as good as the staff our customers deal with and my colleagues at the other societies are firmly in this camp too.
I am hoping the M1 may open soon; it is now nearly 9pm and I have run out of sweets and have my legs crossed…
Today had gone so well too; I have been in Leicester on an Achievers Academy event and had a really good day with the delegates. The academy is an initiative that we run with 6 other Building Societies; Teachers, The Hanley, The Ipswich, Leek United, The Loughborough and Market Harborough. It has been running for a couple of years now and each society puts on 2 delegates, who are hungry for development and have potential; we then put them through a series of pretty tough exercises to hone their skills. Coupled with this each CEO mentors delegates from other societies. This year I am working with Clare and Carole from Leek United.
The idea is to work with them between events and offer advice and coaching to help channel and stretch their development. It is great fun and very rewarding. Yesterday was a presentation skills training course in advance of a formal event next week, where all the delegates will have to present to a "dragons den" of CEO's - nasty!
I firmly believe that our people are what differentiates our service and therefore development for those who want it is critically important. Saffron Building Society is only as good as the staff our customers deal with and my colleagues at the other societies are firmly in this camp too.
I am hoping the M1 may open soon; it is now nearly 9pm and I have run out of sweets and have my legs crossed…
Friday, 23 January 2009
We are now officially in recession - but recessions are not new and they do end!
The media have already started to "state the obvious" today, confirming to us the general public a fact we have probably know for some months now. The UK is officially in recession!
But what does it mean? What should we do? What has happened in the past?
I was in our Ware office this morning and came across some historic documentation, some it dating back to the 1800's about the dealings of the Building Society. I was drawn to a quote from the directors’ report in the 1970 report and accounts, which lead me to look at what was said in other recessionary years. The following quotes are from just such reports, including one from me, which will be in our 2008 report that will be going out to members shortly:
1970 - "The year has been one of uncertainty nationally and it is difficult to forecast the future trend of interest rates. However, it has become clear that Building Societies are now regarded as a secure investment for savings and the movement generally is receiving a record inflow of investment money."
1991 - "The difficulties within the economy that prevailed throughout 1990 intensified during 1991. Although Bank base rates reduced seven times during the year thereby allowing mortgage rates to fall by almost 4%, the damage inflicted to the housing market was all too evident. Falling House prices were recorded in many parts of the Country."
2008 - "In my opinion it has been an extremely difficult year for consumers, where not only did we all have to come to terms with rising inflation driven predominantly by food and energy prices, but we have also had to contend with an uncomfortable level of uncertainty about such things previously regarded as sacrosanct. I am talking of course about the banking and finance industry that has faced a period of unprecedented negativity. The phrase “you can bank on it” may not have quite the same meaning to us all going forward. Against a backdrop of financial meltdown, quite literally for some institutions, it is appropriate that I recount some of the key financial issues facing us all and how Saffron Building Society has coped and will continue to do so in arguably the most uncharted financial waters in documented history."
Recessions will always happen; it is unreasonable to assume that constant growth and economic buoyancy will continue ad infinitum. But if we all hold our nerve, save more, borrow less and spend wisely, this recession will, like all those that have come before, become history and the media will have to find some other source of bad news in an attempt to dampen our spirits.
But what does it mean? What should we do? What has happened in the past?
I was in our Ware office this morning and came across some historic documentation, some it dating back to the 1800's about the dealings of the Building Society. I was drawn to a quote from the directors’ report in the 1970 report and accounts, which lead me to look at what was said in other recessionary years. The following quotes are from just such reports, including one from me, which will be in our 2008 report that will be going out to members shortly:
1970 - "The year has been one of uncertainty nationally and it is difficult to forecast the future trend of interest rates. However, it has become clear that Building Societies are now regarded as a secure investment for savings and the movement generally is receiving a record inflow of investment money."
1991 - "The difficulties within the economy that prevailed throughout 1990 intensified during 1991. Although Bank base rates reduced seven times during the year thereby allowing mortgage rates to fall by almost 4%, the damage inflicted to the housing market was all too evident. Falling House prices were recorded in many parts of the Country."
2008 - "In my opinion it has been an extremely difficult year for consumers, where not only did we all have to come to terms with rising inflation driven predominantly by food and energy prices, but we have also had to contend with an uncomfortable level of uncertainty about such things previously regarded as sacrosanct. I am talking of course about the banking and finance industry that has faced a period of unprecedented negativity. The phrase “you can bank on it” may not have quite the same meaning to us all going forward. Against a backdrop of financial meltdown, quite literally for some institutions, it is appropriate that I recount some of the key financial issues facing us all and how Saffron Building Society has coped and will continue to do so in arguably the most uncharted financial waters in documented history."
Recessions will always happen; it is unreasonable to assume that constant growth and economic buoyancy will continue ad infinitum. But if we all hold our nerve, save more, borrow less and spend wisely, this recession will, like all those that have come before, become history and the media will have to find some other source of bad news in an attempt to dampen our spirits.
Thursday, 22 January 2009
It's official. Building Societies give better service than banks.
I was really pleased today to get a report from the Building Society Association about some recent market research they had commissioned on customer service in banks and building societies.
Building Societies really scored well against the banks as the graphs below show. Saffron's own research with members showed customer satisfaction to be high. It is good that overall the Building Society sector is valued for it's fair treatment, trust, advice and overall service to customers.
I believe that serving only one master i.e the customer, gives Building Societies an edge over shareholder businesses.
Building Societies really scored well against the banks as the graphs below show. Saffron's own research with members showed customer satisfaction to be high. It is good that overall the Building Society sector is valued for it's fair treatment, trust, advice and overall service to customers.
I believe that serving only one master i.e the customer, gives Building Societies an edge over shareholder businesses.
Wednesday, 21 January 2009
Where will it all end?
There is a lot going on in economic terms at the moment. Inflation data out today shows CPI down to 3.1%, which I guess is no surprise really - fuel prices have cooled off and it felt as though everything was discounted this Christmas.
The government has announced a whole new series of measures including asset protection schemes, an extension of the credit guarantee scheme, a Bank of England asset purchase scheme or "Toxic Bank" - where will it all end? What I do know is that at some time in the future it will all have to be paid for. Interest rates will have to go up and so will income tax.
So to Saffron's response to the latest base rate cut. Base rate has hit an unprecedented low, and partly for that reason, Saffron are not moving standard variable rate this time. The cost of borrowing has come down dramatically in recent months and we feel the current rate reflects appropriate pricing for risk, funding costs and our size as a relatively small lender. Our tracker loans on the whole will reduce, but I have concerns about the long-term effect of artificially cheap mortgage payments on the UK consumer.
Cynically one could argue that low rates in the US are what started the whole "credit crunch" in the first place. Back in 2004 US rates were at 1% and borrowers took out very cheap mortgages (including sub-prime) and by late 2006 with rates back up to 5.25% many could not afford to pay and the process of "jingle mail" (voluntary repossessions) started. The rest is well documented history.
I worry that the UK borrower could experience the same repayment shock when rates go back up to 5% or more - and they will; it is only a matter of time.
To prevent borrowers from being hit by unexpected high rates, Saffron have decided to offer some of our borrowers the brief opportunity to switch and fix at competitive rates. This gives real long term value for money and protection, as well as putting our members in control of their mortgage payments. Saffron are offering the product transfer with no fees, exit charges or other strings attached – making it easy is all part of doing right by our members, after all.
On our savings range, we have passed on no reduction to our 55 plus accounts and our Children's Ladybird account to do what we can to look after accounts which are more sensitive to interest. Saffron are also developing some new products for our loyal branch customers - watch this space....
The government has announced a whole new series of measures including asset protection schemes, an extension of the credit guarantee scheme, a Bank of England asset purchase scheme or "Toxic Bank" - where will it all end? What I do know is that at some time in the future it will all have to be paid for. Interest rates will have to go up and so will income tax.
So to Saffron's response to the latest base rate cut. Base rate has hit an unprecedented low, and partly for that reason, Saffron are not moving standard variable rate this time. The cost of borrowing has come down dramatically in recent months and we feel the current rate reflects appropriate pricing for risk, funding costs and our size as a relatively small lender. Our tracker loans on the whole will reduce, but I have concerns about the long-term effect of artificially cheap mortgage payments on the UK consumer.
Cynically one could argue that low rates in the US are what started the whole "credit crunch" in the first place. Back in 2004 US rates were at 1% and borrowers took out very cheap mortgages (including sub-prime) and by late 2006 with rates back up to 5.25% many could not afford to pay and the process of "jingle mail" (voluntary repossessions) started. The rest is well documented history.
I worry that the UK borrower could experience the same repayment shock when rates go back up to 5% or more - and they will; it is only a matter of time.
To prevent borrowers from being hit by unexpected high rates, Saffron have decided to offer some of our borrowers the brief opportunity to switch and fix at competitive rates. This gives real long term value for money and protection, as well as putting our members in control of their mortgage payments. Saffron are offering the product transfer with no fees, exit charges or other strings attached – making it easy is all part of doing right by our members, after all.
On our savings range, we have passed on no reduction to our 55 plus accounts and our Children's Ladybird account to do what we can to look after accounts which are more sensitive to interest. Saffron are also developing some new products for our loyal branch customers - watch this space....
Who's eating who?
Well the news is full today of the Britain's 2nd biggest Building Society Britannia and its planned merger with the Co-op. Whilst, I have my own personal views on this merger, I couldn't help drawing comparisons with another story I saw on the BBC News website today regarding the evolution of the dung beetle. Apparently it has grown longer legs, sharper teeth and no longer eats dung. Instead it now eats the millipedes that it used to compete with for the dung!
I am not sure which of the Co-op or Britannia are the dung beetle in my mind, however I am sad that such a large and respected society will be exiting the sector.
The saving grace for me, is that Britannia will remain as a customer owned business and still a large part of the mutual movement.
I am not sure which of the Co-op or Britannia are the dung beetle in my mind, however I am sad that such a large and respected society will be exiting the sector.
The saving grace for me, is that Britannia will remain as a customer owned business and still a large part of the mutual movement.
Monday, 19 January 2009
The Human Side of an Economic Downturn
There's been a lot of negative coverage of banks in the last year or so, and we are all familiar with the sight of bankers leaving their offices in Canary Wharf or on Wall Street, with the contents of their desks in a cardboard box. I would guess that for many of you, the sight of "rich bankers" losing their jobs has not been one that you have over-sympathised with, however there is a consequence for the smaller business, such as Saffron. We are a regional building society, and have been largely shielded from the direct effects of the world wide slow down, however we can't shield ourselves forever and we have had to bow to the inevitable.
With the financial services industry as it is: interest rates at an all time low and the cost of bailing out the Icelandic banks and Bradford & Bingley to be paid for, we were forced into taking some action to manage our costs and to my great regret, a small number of roles and individuals, have been placed at risk of redundancy, pending the completion of a formal consultation process. The New Year has seen a number of companies in different industries announce similar moves, however that doesn't make this news any easier to take for the individuals concerned.
Such decisions are never easy, however as CEO and as a member of the Board, I have to stand up and be accountable for them. The Board's primary role is to look after our members and customers and in order to do this we must fit our cost base to the opportunity presented by a given market. So it is not surprising that like many firms we are taking action to cut our cloth accordingly.
That said, we will do all we can to minimise the impact on our people - but this doesn't stop us feeling for those affected and the thousands like them across the UK.
With the financial services industry as it is: interest rates at an all time low and the cost of bailing out the Icelandic banks and Bradford & Bingley to be paid for, we were forced into taking some action to manage our costs and to my great regret, a small number of roles and individuals, have been placed at risk of redundancy, pending the completion of a formal consultation process. The New Year has seen a number of companies in different industries announce similar moves, however that doesn't make this news any easier to take for the individuals concerned.
Such decisions are never easy, however as CEO and as a member of the Board, I have to stand up and be accountable for them. The Board's primary role is to look after our members and customers and in order to do this we must fit our cost base to the opportunity presented by a given market. So it is not surprising that like many firms we are taking action to cut our cloth accordingly.
That said, we will do all we can to minimise the impact on our people - but this doesn't stop us feeling for those affected and the thousands like them across the UK.
Thursday, 8 January 2009
Borrowers 3 - Savers Nil
Well, as I guess most of us expected, the MPC cut rates today by 0.50%.
My own view is that they have not yet allowed time for previous cuts to have an effect and that this one was not necessary. Mortgage rates are pretty much at an all time low for existing borrowers and I am concerned that people will get used to artificially deflated mortgage repayments and then struggle to cope with payments increases when rates go back up to more normal levels of around 5%. My advice to anyone (and I am doing this) is to leave their payments unchanged and enjoy being able to repay your mortgage a bit quicker.
My other concern is for savers, particularly retired savers who rely on interest for their income. For those of us not yet retired, it is really only important for interest to be above the rate of inflation (which I think it is likely to be in the near future) but if you are on a fixed income it is the absolute amount that matters.
My thoughts now need to be on how we handle this rate cut, I want to limit damage to our loyal savers where possible, so I need to think hard....
My own view is that they have not yet allowed time for previous cuts to have an effect and that this one was not necessary. Mortgage rates are pretty much at an all time low for existing borrowers and I am concerned that people will get used to artificially deflated mortgage repayments and then struggle to cope with payments increases when rates go back up to more normal levels of around 5%. My advice to anyone (and I am doing this) is to leave their payments unchanged and enjoy being able to repay your mortgage a bit quicker.
My other concern is for savers, particularly retired savers who rely on interest for their income. For those of us not yet retired, it is really only important for interest to be above the rate of inflation (which I think it is likely to be in the near future) but if you are on a fixed income it is the absolute amount that matters.
My thoughts now need to be on how we handle this rate cut, I want to limit damage to our loyal savers where possible, so I need to think hard....
Be sure your blogs will find you out......
We have a tradition here at Saffron (which I think is common in most companies) that I completely forgot about about. Tuesday this week was my first day back from the break, and pretty hectic, Wednesday I was in London all day at meetings and Thursday was consumed with MPC announcements and planning how to deal with that, but I should have bought cakes for all the staff for my recent 40th.
A number of staff read this blog and promptly reminded me that it was nice that I had advertised my recent birthday, but where was their cake?
So Friday is cake day here at Saffron - oops!
A number of staff read this blog and promptly reminded me that it was nice that I had advertised my recent birthday, but where was their cake?
So Friday is cake day here at Saffron - oops!
Tuesday, 6 January 2009
Happy birthday to me and Saffron
Today was my first day back at work following the Christmas and New Year break. This year, my break was slightly extended with a long weekend away with my wife, to celebrate my 40th year (or should that be commiserate?!)
Standing the test of time
It is fair to say that no matter who you talk to everybody is concerned about the
So, whilst consumer sentiment is low at the current time and in my view not helped in a big way by bad news media reporting, history tells us that every downside will eventually recover.
Speaking of which, I await, with baited breath, this Thursday’s Monetary Policy Committee meeting and their 12.00 noon announcement.
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