Nationwide switches to SAP for Banking

The UK's Nationwide Building Society is migrating its banking, savings and mortgage operations to the SAP for Banking platform as part of a £300 million business transformation programme.

German vendor SAP says its technology will streamline core processes, reduce costs and improve turnaround and processing of applications and transactions.

The building society, working with technology partners Sap, IBM and Capgemini, will implement the technology in a phased programme, focusing initially on current accounts before moving on to savings, mortgages and branch systems.

The SAP platform will replace systems supplied by Unisys and Fujitsu. Darin Brumby, divisional director, business systems transformation, Nationwide, says Sap for Banking will provide the building society the flexibility to adapt and respond to unseen future changes and advancements in the industry.

"Not only will it enhance our speed to market with products, it will also improve the overall customer experience with the society while reducing costs," says Brumby. Thomas Balgheim, SVP, global banking line of business, SAP, adds: "SAP's banking specific solutions are built upon a flexible and scalable platform that provide the foundation for addressing the many challenges faced by financial services providers today, from increased competition and value adding customer services, to the demands of regulatory compliance and managing new growth opportunities."

The SAP deal is part of Nationwide's six year, £300 million, programme to revamp branches and improve Internet and telephone banking services, which began in 2004.

Small societies restrict lending

The turmoil in the financial markets has led several small building societies to restrict or even halt fresh mortgage lending.

The Bath and the Earl Shilton have withdrawn all their deals, except those at their standard variable rates. Three others - the Newbury, Melton Mowbray and the Tipton & Coseley - are only lending to local people.

All have been swamped by demand but have found funds hard to come by on the financial markets.

The Bath building society admitted it had temporarily run out of money to lend. "Wholesale money is difficult to get and we have come to a standstill at the moment," said a spokesman. "We are hoping it will just be for a month, but we have taken on so much [new business] we have just run out of money to lend at the moment."

The Tipton & Coseley said the fact it was still offering 95% mortgages meant it had been attracting interest from customers unable to obtain mortgages elsewhere. "We were getting a lot of calls from around the country and we wanted to make sure that people locally can get them," said the society's Chris Martin. "Lenders are withdrawing rates and increasing them and limiting the percentage they will lend on.

"We are a bit loath to do that and it is to make sure we don't have to that we are restricting borrowing to people in our area," he added.

he drying up of funds in the financial markets has already led to the crash of one of the country's biggest mortgage lenders, Northern Rock.

But the effects of the crisis are turning out to be more widespread. All lenders are now much more cautious about who they will lend to - both to their public customers and also to professional ones in the financial markets. That has led directly to the disappearance of mortgages worth more than 100% of a property's value. And some lenders are now reluctant to lend more than 90%.

The Council of Mortgage Lenders has already warned that the "mortgage tap" could be turned off this year. Lenders expected to fund a third of their lending by borrowing from other financial institutions on the financial markets, but this source of funds has now dried up.

The economics consultancy Capital Economics - which has long argued that the housing market in the UK was a bubble waiting to burst - warned that the drying up of funds might lead to a downward spiral of falling house prices this year.

Fixed rate mortgages 'are the key'

The Chancellor unveiled plans to persuade homebuyers to take out longer term fixed-rate mortgages and to help key workers on to the housing ladder.

Mr Darling thinks fixed rates lasting up to 25 years will bring stability to the housing market, and protect homeowners from the payment shock of seeing their interest rate suddenly shoot up.

He also launched two shared ownership schemes which would allow key workers such as nurses and teachers to pay for a mortgage, initially covering just half of the property value. They will be offered a low rate loan for the rest of the value until they can afford to buy a bigger share of their property. This is the latest version of a failed government scheme which helped only 451 people into new homes, at a cost of £350m.

However, this scheme will allow borrowers to shop around for the best deals, and should be simpler to arrange. In a further boost, these borrowers will not have to pay any stamp duty on their home until they own at least 80 per cent of it.

Normally buyers must pay 1% of the price on homes worth upwards of £125,000, 3% above £250,000, and 4% over £500,000. The Government is also desperate to encourage UK homeowners to take out longer-term fixed rates. Of the one million plus mortgages taken out in the UK last year, only three per cent were for fixed rates of ten years or longer.

This compares with around half of all mortgages taken out in the U.S. and France. The problem with the UK model is that when borrowers come to the end of their mortgage term payments can rise suddenly because interest rates have increased since they last took out a loan.

This is when homeowners can start falling behind with their monthly repayments and risk being repossessed. The Chancellor believes that if borrowers had fixed rates lasting ten, 20 and 25 years then families would have the security of knowing what their repayments would be.

Yesterday he set out proposals to encourage banks and building societies to pool data on how many borrowers repay their mortgages early and what charges they have to pay. He hopes that by looking at the example of long-term fixed rate mortgages in other countries the banks and building societies will be able to find a way to charge a smaller early repayment penalty.

British homeowners are not keen on long-term fixed rates because of the penalties for quitting.

BUDGET 2008

For example, a borrower with a long term fixed rate could pay an early repayment charge of as much as 7% of the amount they have left to repay - £9,100 on an average £130,000 mortgage.

David Hollingworth from brokers London & Country says: 'It is extremely difficult to plan for what is going to happen 25 years or even ten years down the line. Borrowers like the idea of long-term stability but don't want to be trapped for the long-term.'

Gravity packager software

The developer of packager software system Gravity is looking to set up a whole of market sourcing system to rival Mortgage Brain and Trigold.
Called Orbiter, it will offer sourcing, processing and online compliance services.

The system is being developed by software firm Oppono, creator of packager processing and sourcing system Gravity, which has been running for two years.

It plans to roll out a whole of market solution by the end of 2008, allowing it to offer what it calls a one-stop shop market proposition.