Five UK Building Societies Get Credit Ratings Bump

Credit ratings agency Moody’s has given a positive assessment of the performance of several UK building societies – a move which could result in cheaper mortgages for customers.

Mortgages and other financial products from some of the UK’s leading building societies could become cheaper thanks to recent assessment by credit ratings agency Moody’s.

Moody’s has said that the performance by Nationwide, Yorkshire, Principality and Coventry building societies has gradually improved over the last two years, making them a better bet to lend to. Newcastle and Nottingham were also included, though these were seen to have improved to a lesser extent.

Yorkshire, for example, has now seen its subordinated debt rating upgraded by two levels from Ba2 to Baa3, essentially making it cheaper to for the building society to raise funds on wholesale money markets – savings it could potentially pass on to its customer in the form of cheaper products, such as mortgages.

According to Moody’s, the building societies for which it had upgraded its outlook has achieved better asset-quality performance when compared to similar institutions.

Moody’s also cited better underwriting standards and “improvements in risk management controls and culture” as reasons for the building societies’ improved financial position.

Marjan Riggi, Senior Credit Officer and a vice president at Moody’s, commented: “Our assessment recognises that the UK economy is slowly recovering and that broader banking and regulatory reforms are gradually taking shape.”

Andy Caton, corporate development director at Yorkshire Building Society, welcomed the news, saying: “It’s welcome news that an external important credit agency recognises that this sector is on an improving trend.”

Moneyhighstreet comments: “It’s great to see that financial institutions are learning from their mistakes – and that international credit ratings agencies are taking notice.

“Yorkshire Building Society already offers some very competitive fixed-rate mortgage deals, so it remains to be seen whether the society’s improved rating will filter down to customers and how long that will take – be sure to keep an eye out here, though. We’ll let you know if it does.”

“With the Bank of England likely to hold interest rates steady at 0.5% for the next year or more, the outlook for the mortgage market is a positive one – but recent figures have shown that even a small increase could have a significant impact on the recovery, making it important for borrowers to be prepared for when the rate rises.”