The role of building societies Andy Caton Corporate Development Director Yorkshire Building Society The role of building societies

Agenda Introduction to YBS Market background A role for building societies Open Market HomeBuy The future?

Yorkshire Building Society 3rd largest building society 1.9 million members 131 branches & 71 agencies 1.3% UK mortgage market share Focus on residential house purchase Mutual - owned by our customers

Mortgage Market Background Boom in lending…but lower margins Competition & pricing Customer “churn” Growth in BTL & niche areas FTBs Link to mutuality ( 1) Alliance & Leicester, Bradford & Bingley, Northern Rock (2) Britannia BS, Nationwide BS, Portman BS Net Interest Margin Comparisons

A role for building societies Mutual model & historical role Building society initiatives YBS product initiatives YBS & Open Market HomeBuy

OMHB Illustration: How It Works House purchased for £150,000 and sold 5 years later at £180, % Government Equity Loan £ 18, % YBS Equity Loan £ 18,750 75% YBS Conventional Loan £ 112,500 20% increase in house price

OMHB Illustration: How It Works Exit Valuation & £180,000 sale price 12.5% Government Equity Loan £ 18,750 + £ 3,750 repaid 12.5% YBS Equity Loan £ 18,750 + £ 3,750 repaid £ 22,500 repaid to Gov ’ t £ 22,500 repaid to YBS £ 110,000 repaid to YBS Total paid back £ 155,000 Equity retained £ 25,000 75% YBS Conventional Loan £ 112,500 loan less any capital repayments over 5 years, say £ 2,500 = £ 110,00 outstanding

OMHB Illustration: Affordability £112,500 OMHB mortgage £142,500 conventional mortgage (95% LTV) £150,000 No Deposit FTB mortgage Rate = 6.50% £395 fee No HLC Monthly payment £759 Total paid over 5 years = £45,924 Rate = 6.35% No fee No HLC & £450 c/back Monthly payment £998 Total paid over 5 years = £59,416 Rate = 5.85% £595 fee £2,550 HLC Monthly payment £904 Total paid over 5 years = £57,345 £150,000 purchase: OMHB versus some alternatives

OMHB: Experience To Date Launch preparations YBS products & take-up Customers profile Feedback & improvements Issues & risks

Lessons from the past Risks for customers Risks for lenders Capital markets solutions (and lack of them) Some ideas Future development of shared equity lending

Conclusions Shared Equity has a role to play in assisting LCHO Success of YBS OMHB demonstrates a public/private solution can work Good fit with building society core purpose A case for more creative thinking A new business model required?

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