Murray N. Rothbard is attributed with first using the phrase Banksters. He said that his phrase described the banking model for western economies. He felt that the model consisted of a state sponsored money lending racket, with their commercial exposure underwritten by the public purse and the political intervention of governments. Recent events have perhaps made us take a little bit more notice of Mr Rothbard’s comments and the relationship between the government and financial sector. A recent survey from Which magazine has shown that whilst four or five of us want criminal bankers to be prosecuted, the majority of us do not trust the government to implement banking reforms that are in our interests.
So perhaps it is time we took the matter into our own hands and looked at the different financial models. It is obvious that even over the last few weeks that the banks are fast losing peoples trust, with the miss selling of payment protection followed by the computer breakdown at NatWest and finally the rate fixing scandal. I get the feeling that now people are getting angry and are reaching a tipping point, and many are prepared to walk away from relationships they have had for many years. Already, Nationwide Building Society have reported an 85% jump in online bank transfers over the last week. In addition, the Co-op and Norwich and Peterborough (part of Yorkshire Building Society) reported similar figures.
Interestingly, a lot of people that are transferring are moving to Mutuals. These organisations are without shareholders and are perceived to operate more ethnically than the banks have. Mutuals exist for the benefit of members and are owned by the members, and importantly as a result of their status are not profiting maximisers. Therefore, it will be of little surprise that they have not had to apply for any government bailouts, and have continued in general to make profits during the financial crisis.
Mutuals not only extend to opening new current accounts but many offer better mortgage deals than the banks, with importantly high customer satisfaction rates. Even in these troubled times they have managed to increase their lending by 53.8% in twelve months to May 2012. It is possible that the Building Society movement could be undergoing a renaissance as they continue to lend in difficult times and generally maintain peoples trust.
Although I have found their underwriting to be much tougher than it was, they are more likely to take a more common sense approach to lending. Also, they have entered a few niche markets that the banks have exited from. For example, they will lend to people in retirement and take a more flexible approach to buy-to-let lending. I have also found than when looking at best buy mortgage lending charts, they are dominated by small Building Societies.
So, if you are looking for an alternative to your bank mortgage, Building Societies maybe the right place for you.
Kieron Bassett Financial Services has two Independent Financial Advisers who specialise in mortgages. Contact us on (01524) 832057, via e-mail, info@kieronbassett.com, or visit www.kieronbassett.com.
Kieron Bassett DipPFS
23 July 2012
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