Flexibility is the number one most important attribute a financial organisation can have; customer needs change rapidly, and products which are perfectly suited to the needs of today could be outmoded and obsolete within a short space of time. Being able to move with the times, predicting how the market will change and planning accordingly, is the fundamental attribute which determines whether a business will be successful or not. Halifax is a perfect representation of how a business can go from strength to strength by re-imagining its core processes, adapting where necessary and reshaping itself for the future.
From its roots as a mid-19th century building society, conceived by local businessmen above a local pub, to one of the largest and most respected financial organisations in the UK, Halifax plc has shown how a willingness to change and the expertise to do so effectively are vital survival traits in the financial world.
The Halifax which we know today began life as a small, local building society. Building societies in the modern era operate in a very similar way to banks; Nationwide, for example, offers much the same products as a high street bank, the only difference is in the business’s “behind the scenes” structure. However, in the early days of building societies, they were very different animals from banks.
Beginning in the late 18th century, in Birmingham, a series of building societies were set up to enable the newly wealthy business owners of the industrial revolution to put their earnings to work. The sudden influx of cash which resulted from the UK’s economic revolution meant that a lot of small business owners found themselves with more money than they knew what to do with; the demand for their services had grown exponentially, and they needed options for investment. The ingenious scheme which led to the formation of the first building societies was this; many local workers needed loans to secure houses for themselves, but found it difficult to get approval from the banks. Instead, the local businessmen contributed to a central “pot”, which was then used to provide funding for citizens in need of housing. Just as with any other loan, the lender charged an interest rate on their money, and received a profit from repayment of their loan.
The idea was that the local community could support itself, instead of relying on bankers to fund their properties. Because the building society had no shareholders, its only commitment was to providing a high quality of services to the people who provided the funds - the lenders who chose to invest with them. Because there was little incentive to maximise profits and satisfy shareholders, building societies had no reason to squeeze large profits from borrowers, and could offer lower interest rates than banks. This meant that investment was kept within the local community, and all members could benefit; those with money could invest it securely and receive a profit, while those in need of a loan could apply for one from local sources, hopefully securing a better rate than a traditional bank could provide.
Halifax was founded in the golden age of building societies in Halifax, West Yorkshire, in 1853. Though it came from humble beginnings (the top room of the Old Cock Inn, to be precise), it quickly grew to become a major player in the local financial market, and within 60 years had become the largest building society in the country. This is especially impressive when you consider that almost every town in the UK had a building society during this period, and there were many thousands of competitors. Because there were so many small building societies, many larger societies chose to grow through mergers and acquisition, snapping up small fry to expand their empire. Halifax, on the other hand, chose an organic growth route, creating branches of their own in new areas in order to expand. Eventually, in 1928, Halifax merged with its closest local rival, the Halifax Equitable Building Society, creating a new entity with holdings of over £47 million (in today’s money, this equates to around £650 million!)
Tough restrictions on the trading ability of building societies left many with the desire to shed their co-operative roots and begin trading as Public Limited Companies, or a “plc”. Deregulation in 1986 provided building societies with the ability to do so, and in 1989 Abbey National became the first UK building society to “demutualise”. Not until the late 1990s did other building societies follow suit, but in 1997 Halifax floated on the London Stock Exchange as part of its merger with the Leeds Permanent Building Society. 7.5 million of the building society’s customers became shareholders in the new organisation, the largest extension of shareholders in the history of the UK. This willingness of customers to follow the society from its roots to its new existence as a privately run bank demonstrates the high levels of satisfaction Halifax had engendered amongst its customers, and the amount of faith they have in Halifax.
Over the years since becoming Halifax plc, the bank has merged multiple times; once in 2001, becoming part of the Bank of Scotland group as Halifax Bank of Scotland (HBOS), and again in 2009 when HBOS was acquired by Lloyd’s. Now, as part of one of the world’s largest banking organisation, Halifax is well-positioned to offer its mortgage products to the market, and is in fact one of the most trusted banks in the UK, holding the greatest share of mortgages and savings account in the country.
Although Halifax has a long history of steady growth, they have not been able to become one of the world’s foremost banks solely through determination. Their ability to identify and meet customer requirements has been a key driving force throughout their existence, and is best exemplified in their 2009 restructuring of account fees. The removal of all interest from their accounts, both credit and debit, caused a media storm when it was unveiled, and their simplification of overdraft fees likewise drew much attention.
Their simplified current accounts are designed to streamline their usage; instead of pushing consumers to compare near-identical interest rates with their competitors, Halifax replace savings rates with a flat £5 reward payment each month. Likewise, rather than charging interest on a planned overdraft, a daily charge is exacted - £1 per day up to £2,000, £2 per day for £2,000 – £2,999, £3 per day for £3,000+, and so on. This simplification of their fee structure makes it much easier for the average customer to track how their bank is rewarding them, and demonstrates the Halifax commitment to clear, open banking.
As you would expect from a bank with its roots buried so deeply in the provision of property, Halifax are the foremost provider of mortgages in the UK. As such, they have a great deal of holdings in the UK real estate market, and even, up until the late 2000s, had their own real estate agent. Halifax is heavily involved with the UK housing market, and goes to great lengths to ensure that its customers are provided with a wide range of market-leading products, for everyone from first-time homeowners to movers.
Halifax offers a wide variety of mortgage products for different borrowers, so that different customers are given the right deals. The four main areas which Halifax’s mortgages are divided into are their “First Time Buyers”, “Moving House”, “Buy to Let” and “Remortgage” sections. First time buyers are typically constrained by their budget, and so mortgages in this section tend to lean towards those with small deposits and flexible repayment plans. Those borrowers who are moving house typically intend to liquidate their existing equity, and will be able to afford a larger deposit; consequently, the deals on offer in this section are tailored to buyers with a larger deposit. Investors who are looking to buy to let are usually those with substantial sums to invest – they can afford the higher cost of purchasing a home without living in it. Although changes to UK regulations have made buy to let a less attractive proposition than it was several years ago, the market is still very healthy and borrowers will find the deals on offer from Halifax to be very competitive.
Consumer choice is hugely important in modern society, and the ability for customers to discard a deal which doesn’t suit them is vital. In recent years, great pains have been taken to ensure that consumers know they aren’t forced to stick with one service provider; the task of switching from one provider to another has been streamlined until it’s quick, easy and painless, and consumers are now able to move between long-term services without long delays.
Mortgages are no exception to the switch revolution. In fact, many consumers are waking up to the fact that the deal which they signed five, ten or even twenty years ago is now punitive, and doesn’t suit their current circumstances. To help these consumers find the best deal for them, Halifax has tailored their remortgaging services to provide the swiftest, easiest method of switching available. In fact, as an extra incentive, Halifax have begun offering a £500 cash payment to homeowners who switch their mortgages to them – this offer is only available for a limited time period, but reflects the Halifax drive to ensure that customers are always receiving the best treatment. £500 can really help reduce the cost of applying for a new mortgage, so although it may be small in comparison with the size of the mortgage, the extra cash can go a long way towards making Halifax an attractive option.
Essentially, anyone who matches their criteria for a regular mortgage. This means that the property must be worth in excess of £40,000, and that you must have the minimum deposit required – it’s likely that this will be the case, especially if you’ve been paying your mortgage for a while, but if you began your mortgage with an especially small deposit, or if you have an interest-only payment plan, you might need to provide a larger deposit.
Halifax state that it currently takes between 4 to 8 weeks to complete a remortgaging process, but in 2016 the Business Secretary Sajid Javid told the media that the “Better Business Bill” would “give consumers more power over switching providers for the services they rely on, to make sure they are getting the best deals.” The concept of a 7-day switch for mortgages was introduced, to match the speed with which bank accounts and utilities services can be switched. Though feasibility studies are ongoing, it looks likely that the UK Government will encourage mortgage providers to speed up the remortgage process considerably during 2017.
Depending on the product which the borrower chooses, there may or may not be charges associated with the remortgage. In much the same way as a typical mortgage will attract an arrangement fee, some remortgages will also require a similar payment to be made – however, these charges are often lower, and there are several options available for “fee free” remortgages.
During the remortgage process, a homeowner might find it necessary to enlist the services of a legal specialist such as a solicitor or conveyancer. They can be invaluable in dealing with the paperwork associated with switching a mortgage from one provider to another, but can often add a substantial bill on to the switching process. Here, Halifax offers a significant incentive for borrowers to switch to their mortgages; Halifax will cover all of their legal costs when you switch to them. This means that you may not need a solicitor at all – Halifax’s own specialists will handle the transaction at no cost to you! This makes switching with Halifax a very attractive prospect, as this can immediately save a large chunk of cash up front.
Although Halifax is one of the leading providers of residential mortgages within the UK, every homeowner is different and Halifax might not carry a product which suits your situation. It’s possible to check, and find out whether their services are right for you, before applying – it’s important not to apply frivolously, as multiple mortgage applications in a short space of time can damage your credit rating.
Your first step should be to use the Halifax Mortgage Calculator tool on their website; this simple app helps you to determine whether any of Halifax’s products will suit you or not. Although it isn’t a highly detailed program, it can give you an idea of whether you should look at Halifax remortgages in greater detail, or whether your circumstances just don’t fit with the services Halifax provide.
If it looks like Halifax can offer you an appropriate service, the next step you take should be to secure an “Agreement in Principle”. This is a preliminary step before actually applying for a mortgage, and is essentially getting a Halifax mortgage expert to examine your situation in more detail, and will require the bank to make a credit check. Should you pass their credit rating procedure, you’ll be approved “in principle” for their product, meaning that you meet the criteria which Halifax have set out for that particular mortgage. It is not an offer to lend you money, it’s simply an indication that if you were to apply for a mortgage under these criteria, it’s likely that they would agree. They might not, however, and you shouldn’t take this as a guarantee.
An agreement in principle only takes about 15 minutes to complete online, and should be the first step you take if you’re considering applying for a Halifax mortgage. Moving from this point to an actual mortgage offer requires that you submit your personal information and paperwork to Halifax, and can be done either in branch, over the phone or online – the same deals are available in each location, but if you wish to receive advice you’ll need to call or visit a branch.
As Halifax closes in on its 165th birthday, it’s amazing to look back and see just how far it’s come. On that first evening when the idea was floated to found a Halifax Building Society, no-one could have imagined that the organisation would go on to become the nation’s mortgage provider, and that long after all the founding members are gone Halifax would still be a leading light of the financial community. However, by taking advantage of developments and adapting to changes, Halifax has remained at the forefront of UK banking, and had prospered throughout its many years of trading.
In years to come, the UK real estate industry looks set to continue its recovery. The general resurgence of the economy looks likely to benefit Halifax substantially, as increasing interest rates encourage savers and investors alike to trust their finances to Halifax.