Return of first-time buyers help The Cambridge Building Society record strong 2018 results
The return of first-time buyers to the housing market helped The Cambridge Building Society record strong results in 2018, chief executive Stephen Mitcham told the Cambridge Independent.
The mutual advanced £349million in mortgages during the year, meaning its mortgage book grew 15 per cent and is now worth £1.22billion.
“We have had as good a year as we could have imagined,” he said. “2018 was good for us and most other building societies. There has been a good level of growth in the mortgage book.
“If you look back over three years, we’ve grown it in the region of 40 per cent. That is virtually unprecedented for us.
“Alongside that, we’ve grown the savings book and we’ve kept the profit going.”
The government’s Help to Buy scheme and the rise of shared ownership had helped first-time buyers, he added.
“They have really come back into the market in a significant way. It resonates in Cambridge, where there has been a lot of building.
“There has also been a lot of remortgage activity. A big part of that is people preparing for Brexit and the level of uncertainty. People have been trying to get their outgoings down.”
Finance director Peter Burrows noted: “In 2018, the buy-to-let market also held up well. Our buy-to-let products have continued to flourish.”
Stephen added: “Traditionally, we only accepted buy-to-let within our regional heartland. We have now started to accept buy-to-let applications from across England. We did that as a reaction to the changes around the tax rules surrounding buy-to-let.”
The building society achieved profit after tax of £3.24million in 2018, slightly better than 2017 thanks to government research and development tax credits, which were applicable to some of its IT investment during the year, which included the release of an app for customers.
“Part of our role is to make sufficient profit, not excess profit, to make sure we can provide future growth and invest in the future.
“This year, we’ve invested just over £1million in projects - many of them IT-related.”
Customers can now use The Cambridge’s app for day-to-day activities and is technology investments have also helped it keep costs static over the last three years.
And there have been encouraging results from bringing together the two central Cambridge branches into a new store in St Andrew’s Street, where the society’s technology is available for use to customers. The concept built on its first new-look store in St Ives.
Stephen confirmed that customers who use the store, website and phone app were the ones giving the best customer satisfaction ratings.
“It’s a model we’ll continue to roll out in the future as well. We have a blueprint now,” he said.
Looking ahead, the spectre of Brexit looms large, and has prompted many homeowners and home buyers to sit tight - a situation that will surely unwind, but at a rate hard to predict.
Peter said: “All the data about transaction volumes in the mortgage market at the moment show it’s only heading one way. That’s an effect we hope will not remain.”
Amid the uncertainty, The Cambridge has carried out “stress tests” to ensure it is prepared for all eventualities and Stephen pointed out that the regulators had done a thorough job in ensuring financial institutions were able to weather any shocks.
Earlier this month, amid market rate reductions that have resulted from the uncertainty, The Cambridge reduced its rates on its 95 per cent mortgages to attract further first-time and second-time buyers.
And it will relax the tight restrictions around who can apply for its 98 per cent mortgage product in the coming weeks to widen its market.
Meanwhile, at its AGM on April 15, The Cambridge will discuss the latest plans under its Making a Difference campaign, designed to help more people get on the housing ladder and reflect the mutual’s roots.
Savers, meanwhile, have something to look forward to in 2019, Stephen suggested.
After years of support for lenders offered to the Bank of England, which flattened interest rates for savers, there may be some small improvements.
“Notwithstanding the B word, there is a general consensus that the economy is in a much better position and the Bank isn’t offering that support into the market. Therefore there is going to be a lot more competition for savings and you’ll see retail savings rates gradually start to edge up,” said Stephen.