Self-build mortgages aid society’s profits
Register for free to read more of the latest local news. It's easy and will only take a moment.
STRONG demand for self-build mortgages in the Highlands has helped the Scottish Building Society post a 10 per cent rise in profits ahead of its annual meeting in Inverness.
Members will gather at Eden Court Theatre on Thursday to hear that pre-tax profits rose to £931,000 in the year to 31st January 2012 despite tough trading conditions.
Mortgage balances stood at £257.7 million — an increase of 9.2 per cent.
Speaking to The Inverness Courier ahead of the AGM, chief executive Gerry Kay said that despite being "a very prudent lender", the society was prepared to work with customers to whom the banks would not offer mortgages in the current climate.
"We have done very well in the Highlands with self-build mortgages," he said. "It can take nine to 12 months for someone to complete a house and the big banks are not interested in that sort of business, they just want the quick in and out business.
"We still deal with customers face-to-face and we will work with them throughout the process. We have undoubtedly benefited from that approach in the past 12 months."
The society’s high liquidity level and the fact that it raises money from savers, not the retail money markets, means it has the cash to make available for mortgages.
Recently introduced products for first-time buyers include mortgages which allow parents to guarantee payments or provide the deposit through a charge on their home.
Mr Kay detects "small signs" of an upturn in the property market but expects it to remain sluggish for some time to come.
The society has also been able to score over banks with the interest rates it can offer savers.
"It is a very difficult market, incredibly competitive, but we have a loyal customer base and people do save with us," said Mr Kay. "The Dunfermline Building Society is no more, leaving us as the only Scottish-based society and that has helped.
"As a mutual we do not seek to maximise profits. We aim to make sufficient profits to enhance our capital strength and the security offered to members."
Mr Kay said the society had made a strong start to 2012/13 and pointed to a two-year bond paying 3.85 per cent on deposits of £1,000 or more which had to be withdrawn after just two-and-a-half weeks because the targets had been achieved.
He hopes this will stand the society in good stead if the eurozone’s troubles continue.
"I have no doubt that the recovery will take longer if Greece leaves," he said.
Members will be told on Thursday that efforts are ongoing to reduce the amount the society is forced to pay into the Financial Services Compensation Scheme — an obligation which totalled £132.000 in 2011/12.
"We continue to lobby the government through our trade body, the Building Societies Association, concerning the disproportionate contribution we are required to make because of the high rate of savers’ funds we hold on our balance sheet compared with other types of deposit-
taker," said Mr Kay.
