Building Societies


T

Terry D

I fail to understand how any building society can run into financial
problems because of their pathetic interest rates on some of their savings
accounts. For example, my own building society (Darlington) pays an AER of
only 0.1% on one of its 'savings' accounts. I realise that anybody with
sense would avoid such accounts and select one with a higher interest rate,
but there must be billions invested at these low interest rates by people
who don't know better - probably a large proportion of them are queuing
outside Northern Rock Branches at this very moment.

If building societies can borrow at 0.1% and then lend at 7-8% on mortgages,
how can they fail? Perhaps they do squander a lot on prestige high street
branches but even this can hardly explain such a huge deficit as the
Northern Rock has revealed.

In the news this morning, a Northern Rock manager was barricaded in his
office until police arrived, when somebody tried to withdraw a million
pounds from their account, and he refused. Anybody who would invest this
amount in a single building society, probably at a fairly low interest rate,
must be a complete fool.

Departing customers from Northern Rock branches must be a mugger's
paradise! - loads of elderly investors with wallets full of £50 notes.
Would you take a cheque instead of cash?

Terry D.
 
Ad

Advertisements

R

Robin T Cox

I fail to understand how any building society can run into financial
problems because of their pathetic interest rates on some of their savings
accounts. For example, my own building society (Darlington) pays an AER of
only 0.1% on one of its 'savings' accounts.
Northern Rock is no longer a building society but a bank.

http://en.wikipedia.org/wiki/Northern_Rock
 
J

John Boyle

Terry D said:
I fail to understand how any building society can run into financial
problems because of their pathetic interest rates on some of their savings
accounts. For example, my own building society (Darlington) pays an AER of
only 0.1% on one of its 'savings' accounts. I realise that anybody with
sense would avoid such accounts and select one with a higher interest rate,
but there must be billions invested at these low interest rates by people
who don't know better - probably a large proportion of them are queuing
outside Northern Rock Branches at this very moment.

If building societies can borrow at 0.1% and then lend at 7-8% on mortgages,
how can they fail? Perhaps they do squander a lot on prestige high street
branches but even this can hardly explain such a huge deficit as the
Northern Rock has revealed.
Northern Rock isnt a building society its a bank.

It doesnt borrow much dosh from clients at all, only 24% of its funding
comes from retail depositors, the rest comes from the money markets at
commercial rates.

The Darlington Building Societies cost of shareholders funds (i.e. the
rate it pays out overall) seems to be between 3.5 & 4% and only about 7%
of its funding comes from sources other than customers.
In the news this morning, a Northern Rock manager was barricaded in his
office until police arrived, when somebody tried to withdraw a million
pounds from their account, and he refused. Anybody who would invest this
amount in a single building society, probably at a fairly low interest rate,
It was an internet account at a high rate. They were refused because the
T&Cs of the internet a/c make it clear that branch transactions are not
allowed.
must be a complete fool.
I agree I wouldnt put that much dosh with one institution, but people
always went more and more and forget that interest is paid in return for
risk.
 
T

tim.....

John Boyle said:
Northern Rock isnt a building society its a bank.

It doesnt borrow much dosh from clients at all, only 24% of its funding
comes from retail depositors, the rest comes from the money markets at
commercial rates.

The Darlington Building Societies cost of shareholders funds (i.e. the
rate it pays out overall) seems to be between 3.5 & 4% and only about 7%
of its funding comes from sources other than customers.


It was an internet account at a high rate. They were refused because the
T&Cs of the internet a/c make it clear that branch transactions are not
allowed.

I agree I wouldnt put that much dosh with one institution,
After a while, one runs out of institutions and has
to save that next million with the same one :)

tim
 
J

John Boyle

tim..... said:
After a while, one runs out of institutions and has
to save that next million with the same one :)
Oh to have such have problem!
 
G

GSV Three Minds in a Can

Bitstring <[email protected]>, from the wonderful
person John Boyle said:
It was an internet account at a high rate. They were refused because
the T&Cs of the internet a/c make it clear that branch transactions are
not allowed.

I agree I wouldnt put that much dosh with one institution, but people
always went more and more and forget that interest is paid in return
for risk.
But to be fair, putting £1m away in risk free fashion is probably not an
option (well, be a real chore anyway .. 18 different joint accounts or
something).
 
Ad

Advertisements

J

John Boyle

GSV Three Minds in a Can said:
But to be fair, putting £1m away in risk free fashion is probably not
an option
I agree
(well, be a real chore anyway .. 18 different joint accounts or
something).
My point was that they could go for a lower rate of interest, or have
more accounts, not that they have a risk free investment, but having
said that the basis for risk free return is government debt.
 
G

GSV Three Minds in a Can

from the wonderful said:
I agree
My point was that they could go for a lower rate of interest, or have
more accounts, not that they have a risk free investment, but having
said that the basis for risk free return is government debt.
Depends on your government. c.f. Argentina, or even 'Pound in your
pocket' Wilson. I'm not sure NR was a good high interest rate anyway
(even before the risk became apparent).
 
J

Jonathan Bryce

GSV said:
Depends on your government. c.f. Argentina, or even 'Pound in your
pocket' Wilson. I'm not sure NR was a good high interest rate anyway
(even before the risk became apparent).
They are currently joint top of the moneysupermarket table with West
Bromwich.
 
J

John Boyle

GSV Three Minds in a Can said:
Depends on your government. c.f. Argentina,
or even 'Pound in your pocket' Wilson.
Quite.

I'm not sure NR was a good high interest rate anyway (even before the
risk became apparent).
In the context of the internet rate it is 6.31. whilst there are higher
rates it is still 0.56 above base rate.
 
G

GSV Three Minds in a Can

from the wonderful said:
They are currently joint top of the moneysupermarket table with West
Bromwich.
Not in the tables I look at (at least for £1,000,000 investment),
although I must admit they are further up than I expected .. most of
their rates have been cr&p for the last X years....
 
Ad

Advertisements

T

tim.....

GSV Three Minds in a Can said:
Not in the tables I look at (at least for £1,000,000 investment), although
I must admit they are further up than I expected .. most of their rates
have been cr&p for the last X years....
As have the rates of all of the ex BS turned Banks.

tim
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top