Dunfermline plans to pump new life into mortgage market

Published on Saturday 2 May 2009 13:31

THE Dunfermline Building Society has launched a market-leading one-year fixed rate savings bond in a bid to reassure customers that it is back in business after the takeover by the Nationwide.

At the same time it has promised that some attractive new mortgage deals are in the pipeline, designed to give a boost to the property market in Scotland.

The new savings bond will pay 3.5% fixed for a year on minimum deposits of 100, which is one of the best deals available on the high street. You can open an account in a branch or via the internet or telephone.

Interim managing director at Dunfermline Rudolf Heaf admitted the new offerings were designed to minimise uncertainty for customers as much as possible.

He said: "We want to get the business back on its feet after a period of uncertainty for customers and staff. We want to show them that we are still here, very much open for business, and backed by the Nationwide we are a safe home for their savings.

"It is a sad fact that because of all the other difficulties the society had faced of late it had not been in a position to offer cutting-edge savings deals. We aim to put that right, partly to offer customers reassurance about the future, but also because we want to attract as many new deposits as we can to fund future mortgages."

Research by Moneyfacts confirms the new Dunfermline bond is the best rate available on the high street in Scotland. Bank of Scotland's one-year bond is paying 3% over the counter on minimum deposits of 500, Clydesdale will fix at 2.5% for a year on a minimum 2,000 and the Scottish Society will fix at 2.8% on 1,000.

Royal Bank of Scotland does not have a one-year fix, but instead offers a three-year escalator bond through its branches on sums of more than 5,000. It will pay 3% in the first year, 4% in the second and 5% in the third, giving an average rate over the term of 4%.

Scottish Widows has a one-year bond for customers with 10,000 to put down paying 2.75%, and Standard Life will pay 2.9% on deposits of at least 1,000 on its nine-month telephone account.

Slightly better rates are available on the internet. The Newcastle Building Society is paying 3.6% on a one-year ebond and 4.1% over two or three years. The West Bromwich's ebond pays 4.3% on 5,000-plus deposits fixed for a year.

Having shaken up the Scottish savings market, the Nationwide plans to be equally radical in its approach to the housing market. Its early analysis of the Dunfermline business has uncovered what it views as significant weakness on the mortgage front, with a range of loans which were uncompetitive compared with the rest of the market.

This is something which the new management is determined to fix, and as soon as possible, indicating that new competitive deals should be available within weeks.

Heaf said: "We have spent a good deal of time looking at the Dunfermline's mortgage range and concluded that it didn't have particularly competitive offerings in this space.

"Its range of fixed and tracker deals was particularly weak and this is something we hope to rectify shortly. Unfortunately, because of all the other problems the Dunfermline found itself facing, it lacked the purchasing power to offer cutting-edge deals.

"We now intend to put that right by plugging those gaps and launching some competitive deals, particularly on the fixed rate front but also with trackers. Hopefully, this will help increase the affordability of mortgages and boost homebuyer confidence. But it should also increase the overall availability of mortgage finance in Scotland."