Memorandum submitted by Nationwide
1. Nationwide Building Society is the UK's fourth
largest mortgage lender, second largest savings provider, and
seventh largest high street financial organisation. We are also
the world's largest building society, with more than 11 million
2. Nationwide is pleased to confirm our involvement
with the Open Market HomeBuy scheme to bring more first time buyers
into home ownership. We expect this scheme to help around 20,000
more households to buy their first home.
3. Nationwide believes that it is in the interests
of the industry, the Government, individuals and society as a
whole that first time buyers are able to get a foot on the housing
ladder. Involvement in this new type of equity loan is a natural
step for Nationwide as we have the largest commitment of any lender
to the affordable housing sector in the UK. We are a major player
in low cost home ownership with a long-standing involvement in
funding housing associations, who enable people to purchase properties
on a shared ownership basis. We also lend to individual purchasers
of these properties.
4. We will be offering buyers who qualify an
equity loan combined with a standard mortgage. This will sit alongside
the equity loan offered by the Government.
5. Between now and next October we will be in
discussions with the ODPM and other lenders to determine all the
details, ready for the pilot to start in October 2006. Much of
the detail of products, pricing and marketing is yet to be decided.
6. Nationwide has forecast modest growth in
house prices next year but we do not anticipate a major downturn.
If the value of a property bought on Open Market HomeBuy were
to fall, the mortgage would be repaid first and the lender's equity
loan would take priority over the Government's. The scheme will
represent only a small percentage of our overall mortgage book
and we believe the risk is minimal.
7. Nationwide, together with industry bodies
and individual banks, has been and continues to work constructively
with the Treasury on the Chancellor's proposals on unclaimed assets.
8. Our aim is to reunited unclaimed funds with
their rightful owners wherever possible, and we would want to
ensure that only funds truly "lost" would be released
under such a scheme. We welcome the proposed fifteen year definition
for unclaimed assets, as the longer the timescale, the greater
the likelihood that these accounts are genuinely lost, rather
than merely untouched.
9. Unlike banks we do not have shareholders
who profit from dormant accounts. Money in dormant accounts remains
in the business where it is used for the benefit of all members
of the Society.
10. Members have deposited money with Nationwide
in good faith and believe that it will be retained. We have a
responsibility to our members to make certain that they can reclaim
their money at any point and will be seeking to ensure that this
entitlement is retained under the Government's proposals so that
provision will be made for members, or their estates, to reclaim
their money even after the account has been classified as "dormant".
11. We expect that there will need to be legislation
to allow banks and building societies to release unclaimed funds
to good causes and await more detail from the Treasury on this
point and the likely timetable.
12. Nationwide already gives a significant amount
of money to good causes both through its Community initiatives,
such as support for Comic Relief, Macmillan and Shelter, and also
through the work of The Nationwide Foundation. In fact, during
2004-05 the Society gave over £1.3 million to good causes
and has returned around £4 billion in member value since
1996. We will continue to pursue the possibility of releasing
dormant funds into our own charitable foundation, the Nationwide
13. It is not yet clear whether membership rights
would be retained if the account money is taken off a building
society's balance sheet. The legality of taking members' money
out of an institution, and what happens to that membership, is
an issue which still needs to be addressed.
14. The Chancellor's decision to reverse his
intention to allow investors to put buy-to-let properties into
their Self-Invested Personal Pensions seems poorly timed, since
the decision was scheduled to come into force on 6 April 2006.
15. This will be a financial blow to those people
who have either set up a SIPP in readiness, or who have paid deposits
on off-plan flats so that they can put the property into their
pension in April. The decision will not have any major effect
on the long-term health of the buy-to-let sector, as it affects
only a small proportion of the market. Effectively banning all
residential property from SIPPs seems a disproportionate response
to the concern that people might claim tax relief on holiday homes
or second homes.
16. UCB Home Loans, the specialist lending subsidiary
of Nationwide Building Society, had expected the changes to SIPPs
to provide a 15% boost to the buy-to-let sector next year and
had predicted that between £3 billion and £5 billion
would have been spent on rental property for use within pensions
over the next year.
17. It is disappointing to see that the Chancellor
announced a further consultation on the timing of top-up payments
for seven-year-olds holding a Child Trust Fund, and it would have
seemed more appropriate for these issues to be addressed at the
time of the original consultation. Nationwide had called for confirmation
in the Pre-Budget Report of the amounts and timings of the top-up
payments for seven-year-olds and for secondary school age children,
and also for an announcement that the Government contributions
and the annual limits for additional contributions would be index-linked,
to build in fairness for the future.
18. The Chancellor has confirmed that the Treasury
will hold a major review of Individual Savings Accounts in 2006.
Nationwide would welcome more details of the proposed review.
19. ISA limits have remained unchanged since
they were first introduced in 1999. The £7,000 limit for
saving into a maxi ISA is worth only £5,982 at today's prices,
while the £3,000 cash ISA limit is now worth just £2,564
after six years of inflation. In the interests of encouraging
further saving and building in fairness for the future, Nationwide
would like to see the maxi ISA limit extended £7,000 to £9,000,
and the cash ISA limit extended from £3,000 to £4,000.
6 December 2005