The Cambridge Building Society records another strong year and focuses on community
As we join Peter Burrows and Richard Brockbank to discuss The Cambridge Building Society’s annual results, it’s been a particularly busy week for the organisation.
It was caused by first-time buyers racing to complete before the changes of stamp duty thresholds came into force on 1 April.
“Everyone who had a chance of moving this week is moving this week,” says Peter, the chief executive officer. “So it means our first quarter will look pretty good!”
For those who haven’t followed the changes, the nil rate threshold for stamp duty has dropped back from £250,000 to £125,000.
More tellingly for the Cambridge market, the nil rate threshold for first-time buyers has dropped back from £425,000 to £300,000 and the maximum price at which first-time buyers relief can now be claimed has fallen from £625,000 to £500,000.
“It will cause a peak in March and a lull in April, but I think historically when changes like that have been made, there has been a reasonably quick correction in house prices because people can afford to pay what they can afford to pay,” notes Peter. “So I don’t think the changes will have a huge impact in the medium to long-term.”
The Cambridge has just released its 2024 results and has recorded excellent numbers once more.
Its total assets grew by 6.1 per cent to just over £2billion, reserves stood at £134.1million and profit before tax was £11.4m – down on 2023’s £20.5m, primarily due to interest rates.
“It was another really good year – one of our best in the society’s history,” says Richard, the chief financial officer.
“The last three years we have had record profits. That run has come to an end, as expected, because our business, structurally, makes more money when rates are going up quickly and that has come to an end, so you are left with the underlying performance.
“But that has been very solid and we are very happy with it. 2024 came in slightly better than expected when we sat here last year, but as a business that’s owned by its customers, we’re not really seeking to maximise profit.
“We’re seeking to make a profit that keeps the balance sheet healthy and positions us well to keep lending and doing all the good community work that we are doing. 2024 has delivered that very well for us.”
Peter adds: “We now have £2billion of assets entrusted to us for the first time, which is a good feeling.”
A further £305m was advanced by The Cambridge to home buyers in 2024.
“The mortgage market held up pretty strongly last year and has been strong in the first quarter of this year, but of course it’s hard to unpick the impact of stamp duty changes.
“Our customers are a real broad section of the wider economy so quite a good bellwether for general economic sentiment. I think it’s true that confidence has waned a little over the last six months. There’s been a change of administration in the US and change of messages there and no-one really knows where that’s going to lead. That has second order impacts on us when it flows through macro-economically.
“As yet, neither nationally nor locally, there hasn’t been a discontinuity in the mortgage market. It has continued to trend quite smoothly.”
What has changed is customer sentiment around their choice of fixed or variable rates for their mortgages. While interest rates were rising, fixed rates were naturally very popular. As they fall, it’s a different picture.
“In contrast to a couple of years ago, where almost every mortgage we sold was a fixed rate mortgage, it’s not like that now. Customers are taking more time to choose the particular option that works for them,” says Peter.
Of course, affordability remains a big challenge in the Cambridge housing market, particularly in more central areas.
“About one in five of our mortgages tends to go to a first-time buyer, which illustrates there is a market out there that we are supporting – but also shows it is tricky to get into the market,” says Peter.
The other impact of rate changes, of course, is on savings.
But Peter explains that they too held up quite strongly last year.
“The savings ratio was running at about 10 per cent, so people were definitely saving,” he says. “We’ve found our 100-day notice account has been really popular. It allows people to qualify for an extra boost above the variable rate but they’re not tying their money up for a significant period of time.”
Despite interest rates apparently being on their way down, there could still be some good deals out there for savers.
Richard explains: “Since the financial crisis, the likes of us have been funded quite heavily by the Bank of England. They’ve lent cash to banks and building societies and that’s now been withdrawn back out from the market and that means the likes of us have to replace that money with money from the savings market. So it means while the base rate is coming down, banks and building societies are having to fight a little harder to attract savings money in, so savers might find they do quite well out of that.”
Peter adds: “Typically savings rates are around 4 per cent or a bit more. It varies by account and conditions. There are plenty of mortgages out there at 5-point-something per cent, so the gap between the two is as low as it’s been for a number of years.”
But the figures Peter prizes above all else each year are those in the customer satisfaction surveys.
“We’re really pleased with them,” he says. “We run a number of independent customer satisfaction surveys during the year – it’s a third party talking to our customers on our behalf and they typically survey over 1,000 customers a year. The results we had last year were the best we’d had for five or six years.
“We ended the year with 96 per cent customer satisfaction. Now I’d like to chase the final four per cent, but realistically, you’re not going to get much higher than that!
“We ask a range of questions around whether you think service is improving or declining, would you recommend us to your friends, whether you expect to be a customer for the next 12 months… so we can put them together in a weighted average way to intelligently track how customer sentiment is going.
“That’s not to say we’re going to rest on our laurels. We’re going to continue to invest.”
This includes ensuring convenience and flexibility for customers.
“A number of our historically branch-only accounts now have an online option,” says Peter. “To be clear, we’re not trying to push people out of our branches to online. We are committed to our high street presence but what we really want to do is make sure our customers have a choice. They can go online, they can phone our call centre, or they can go to a branch – whatever works for them. We don’t think of customers as ‘online customers’ and ‘branch customers’.”
Digitally, The Cambridge has launched a significantly upgraded version of its app.
“It’s being received well. It’s taken the functionality to the next level. We went through all the third party testing and user acceptance testing and we’re really pleased how it’s taken. It was in the pipeline for nine months to a year,” says Peter.
“I even got my 18-year-old daughter to open an account via the app to test that teenage feedback was going to be positive! I’m pleased to report she is now a member.
“We already have a list of additions and improvements we want to make to it, so we’ll probably have a six-month upgrade cycle.”
A focus on customer service has also helped ensure The Cambridge has few customers struggling to meet their mortgage payments.
“The best thing to do is have a prudent lending policy, like we do, so you have relatively few people in difficulties. But inevitably, people suffer misfortunes and some do to the extent that it really challenges their ability to pay their mortgage,” says Peter.
“We do our best to support people in those situations. We are open to all manner of different solutions and we have a dedicated team here who people will be referred to and get to know them really well. I won’t pretend we have a magic wand to make people’s financial problems go away – nobody has, but we have got a team that is very experienced at working with people in those positions who can give access to the best possible advice. No-one wants someone to lose their home.”
Peter points out that “there are vulnerable customers on the savings side too”.
By chatting to customers in branch, staff at The Cambridge have helped people avoid scams from doorstep callers, for example.
“Sometimes we’ll talk to somebody who says they need the money for emergency repairs on the roof and we’ll ask what happened…” says Peter. “Our team members have helped people avoid scams over the course of the year by taking the time and offering that personal in-branch service.”
It’s an extension of the community support that is such a focus for The Cambridge.
In its 175th anniversary, as reported by the Cambridge Independent, it has pledged to give at least £175,000 each year to community causes.
And it plans a community conference with Cambridgeshire Community Foundation on 24 June to discuss “the art of the possible”.
“We want to raise the profile of some of the incredibly good things that organisations do in our community and help make a few connections,” says Peter. “We’re going to target a mixture of businesses and community causes so we can make those connections, with senior business leaders and people who run CSR programmes.”
Among the community programmes The Cambridge can discuss with others seeking to make a difference is its innovative Rent to Home scheme, by which first-time buyers – who win the chance via a ballot – are offered a chance to rent one of its own properties for a period then get up to 75 per cent of their rental payments back to put towards a mortgage deposit.
Winners of the ballot for The Cambridge’s latest two properties to enter the scheme – in Woolpit, near Bury St Edmunds – have just been drawn.
And The Cambridge wants to accelerate the number of properties it has in the Rent to Home scheme.
“We have branches in Melbourn, Cottenham and Sawston where we own some surrounding land or adjacent properties. Those three branches are in need of refurbishment, but rather than just refurbish them, we want to do so in a way that also creates some high-quality starter homes in those villages, which we’ll put into the Rent to Home scheme, so they’ll be starter homes available at 70 per cent discounted from the market rent,” says Peter.
“We’ve worked with architects and we’re now working with planners before we can move on. We might create 15 more properties for the Rent to Home scheme doing that, which will make it a really meaningful portfolio.
“We can see our way to having 25 properties, which brings some real heft to the scheme.”
Last year was also notable for The Cambridge winning Employer of the Year at the Cambridge Independent’s inaugural Business Awards, where Peter also took home CEO of the Year in recognition of his leadership of the mutual.
It was a year in which it enhanced its green credentials, installing solar panels on the roof of its Newmarket Road headquarters.
“The installers tell us it’s the second biggest rooftop solar array in central Cambridge – after King’s College,” says Richard. “There’s about 100kW of capacity up there and it can meet our peak demand.
“In the summer, we can have all our laptops on and the air con and we’ll be fully powered by the sun. We were already entirely on renewable energy but we are now contributing to green energy generation.”
And work on its retrofit project on a three-bedroom home in Ferndale Rise is nearing completion.
It is turning the property into a more sustainable, modern property for use in its Rent to Home Scheme and will share what it learns from the retrofitting so others can learn from it.
Meanwhile, it also plans to mark its 175th anniversary with a competition for schools to design a commemorative coin, with the winning design made into chocolate.
But Peter isn’t losing sight of next year’s accounts.
He says: “We won’t accept them being paid into savings accounts unfortunately…”
