Select Committee on Treasury Written Evidence

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 members.


  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 Foundation.

  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

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