Fixed rate mortgages

Fixed-rate mortgages are now back on the political agenda, following a series of announcements last week by
the government. We look forward to seeing more details of its plans for covered bond legislation and a review
of wholesale funding. At this stage, it is too early to say whether announcements about funding will eventually
produce a significant shift in the future design of mortgage products. Even if that can be delivered, consumer
appetite for long-term fixed-rate mortgages will be a key – and perhaps the decisive – factor in determining their
take-up. We have, however, consistently argued that current housing affordability problems are rooted in a
shortage of supply of homes. So we welcome the government’s announcement of its desire to raise housebuilding
rates, while recognising that the targets are challenging. On behalf of lenders, we will be discussing all
the relevant issues in more detail with the government.
A couple of days before last week’s formal announcements about mortgage funding by Gordon Brown and the
Treasury, the new chancellor Alistair Darling had set out the government’s concerns about consumer
preferences for short-term fixed-rate mortgages in an interview published in The Guardian. The chancellor
argued that short-term fixed-rate borrowing brought “volatility” to the mortgage market. He also said that he
was concerned about the arrangement fees paid by borrowers for some short-term fixed-rate products.
In his interview with The Guardian, Mr Darling said: “There has been a big expansion in fixed-rate mortgages
over the last two or three years, but they have all been short term, for a period of two or three years. When you
look around the rest of Europe, it is more common to have longer-term fixed rates. We need to look at that.
We need to reduce the volatility.” He continued: “Brokers want you to come back every two years, rather than
every 10 or 20. The Financial Services Authority has identified this as a problem.”
Fixed-rate mortgages
On the same day that Mr Darling’s interview was published, we released data from our own regulated mortgage
survey (RMS) confirming what the chancellor had told The Guardian about the current popularity of fixed-rate
borrowing. Our data showed that 89% of first-time buyers took out a fixed-rate mortgages in May – equalling the
highest proportion ever recorded. Among home movers, fixed-rate loans were almost as popular, chosen by
73%. Looking at all borrowing in May – for remortgaging, as well as for house purchase – 78% of loans were
taken at fixed rates, equalling the highest proportion on record.
Our data also confirmed what the chancellor had told The Guardian about the growth in popularity – over the
last two or three years – of borrowing at fixed rates. In May 2005, only 56% of loans were taken out at a fixed
rate. The growth in demand for fixed-rate loans over the last two years has been mirrored by a decline in the
popularity of discounted mortgages. In May this year, only 5% of loans were taken out at discounted rates,
compared with 18% in May 2005.
Long-term – or short?
We have been able to analyse the RMS data to provide more information about borrowers’ preferences for
long- and short-term fixed-rate mortgages. In recent months, around 40% of borrowers taking out a fixed-rate
deal have been opting for a term of up to two years. The proportion taking out a fixed-rate loan for two to three
years has been approaching 30%. A little more than 20% have been choosing to fix their rate for three to five
years. And around 10% have been taking out a loan with a rate fixed for five years or more.

Nationwide Mortgages Shropshire

In the first week of voting, the former double Olympic 400 metres silver medallist Roger Black, M.B.E, is encouraging Nationwide members to use their vote in the Nationwide AGM this year and raise money for Disability Sport Events. Roger Black posed for photos at this year's British Open Athletics Championships in Manchester with medal winners (see link to images below).

Roger Black, former Olympic 400 metres silver medallist said: "As we approach the 2012 Paralympics in London, it is essential that we encourage participation in disability sports right through from
grassroots to elite athletes. I hope that Nationwide's 10p donation for every vote cast in its AGM will prompt members to help DSE continue its good work and help many more young people become champions. So the message to Nationwide members is clear - your vote helps disabled athletes, so please use it."

Over 6.6 million Nationwide members will be receiving their voting packs over the next few days and have until 16 July to cast their vote by post or online.

For the second consecutive year, Nationwide Building Society is aiming to raise £100,000 to help disabled athletes. The Society will donate 10p for every vote cast in its 2007 AGM to disabled athletes via Disability Sport Events (DSE). The Society is targeting a minimum of one million members to use their vote, which would generate the £100,000 for DSE, a huge boost for the UK's disabled sports people.

This initiative is one of a range designed to encourage as many members as possible to vote which also sees Nationwide introduce online voting for the very first time.
Ends
Notes to editors
High resolution photographs of Roger Black are available from Nationwide:

http://www.nationwide.co.uk/mediacentre/agm.asp

Nationwide will send voting packs to all eligible members from 16 June 2007. Members have until 11am on 16 July to cast their postal or online vote on the individuals they would like to elect as
directors of the Society. Members can also indicate how they want their vote to be cast on any resolutions that are proposed and they can either do this by appointing a proxy or attending the AGM in
person. Voting gives eligible members a real opportunity to have their say in the running of their Society and can be done by post, on-line at www.nationwide.co.uk or at any Nationwide branch.
Members are also invited to attend the AGM which will be held in Birmingham at the ICC at 11am on Thursday 19 July. Nationwide will announce how many members voted and therefore details of the
donation to DSE on the 19 July.

Nationwide Building Society is the world's biggest building society and has assets in excess of £137 billion. It is the UK's second largest savings provider, fourth largest mortgages shropshire lender and seventh largest high street financial organisation.

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Shropshire Mortgages

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