The Current Economic Climate

It's clear many of you are asking similar questions about what is happening in the economy at the moment and what that means to you and your building society. We'd like to take this opportunity to answer some of those questions.

Who owns Skipton Building Society?

Skipton Building Society is a mutual, owned by our members (those of us with savings or mortgages with the Society) and not by another organisation. This means we don't have shareholders like banks and therefore don't have to pay any dividends from the profit we make. Instead, our profit is re-invested in the Society, meaning we can offer better rates and maintain a financially robust business. It's a simple arrangement but one we have stuck to for over 150 years.

Why is Skipton safer than the banks?

The difference between a mutual like Skipton and a bank is all the money we lent on mortgages this year has come from members' savings – you save, we lend, it isn't much more complicated than that. The banks, however, rely heavily on borrowing money from each other to fund their mortgages. When the Credit Crunch hit, banks could no longer be sure of this source of money and so had problems.

We are not in this position. Instead, we follow the straightforward, yet simple, principle of lending on mortgages from savings that members deposit with us. In addition, we've always had a prudent approach to lending; this means we have never offered mortgages of more than 95% loan to value and our buy-tolet mortgages comprise only a small proportion of our overall lending.

What link does Skipton have with the clearing banks?

Skipton isn't a clearing bank and as such, can't do certain things, such as processing a cheque. As a result, we use a variety of clearing banks to do this for us. In addition, our Treasury team deals with a range of banks as part of the borrowing and investing of funds that are required to run the Society. However, our risk-averse approach to investment means we are comfortable with the security of the clearing banks we deal with – especially as a recent announcement by the Government has effectively guaranteed their future. Even so, the safety of your money is based on your relationship with us, not our bank.

How is Skipton viewed by the industry?

We remain one of the strongest building societies with strong capital ratios. Fitch and Moody's credit rating agencies consider our position to be 'A' rated†. This is partly due to our ability to attract savers to fund our lending. In the first half of the year we received almost double the amount in savings that we lent to borrowers. This year has also seen a 40% increase in new customers.

What about the compensation scheme?

We are members of the Financial Services Compensation Scheme, which protects 100% of your savings with the Society up to a limit of £50,000† per person (or £100,000 for joint accounts). As this is a comforting thought in the present economic environment, we've recently changed our policy to allow our customers to change their accounts into joint names. It's worth noting there could be some implications from doing this, such as changing your tax position or membership status of the Society. However, before you change your account, our staff can discuss these with you to ensure you're fully informed.

Of course if you have questions yourself, your Intermediary Sales Manager will be happy to assist you.

†Information correct at time of printing.