MortgagesJan 15 2014

Harpenden earns mutual respect

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According to its current chief executive, Paul Marsden, a group of entrepreneurial locals were responsible for its formation after each paid £5000 into a pool of funds to help people set up shop in the village. In the end the plan paid off and, as Mr Marsden points out, the struggling village has now expanded into a prosperous centre that has reached, population-wise, its full capacity.

Mr Marsden replaced the long-serving general manager, Mike Reed, six years ago. Mr Marsden is full of praise for his predecessor, whom he claimed transformed the mutual’s balance sheet from £1m to more than £100m during his 37-year tenure. Mr Marsden is indeed immensely proud to be leading the financial institution into its 60th anniversary.

Irrespective of adjustments at the top and the massive changes that have swept through financial markets since 1953, changing products and circumstances have not distorted the building society’s original core values, said Mr Marsden.

“The society already had a particular structure in the way it lends and the principles that were put in place back in 1953 have remained since,” he said. “For example, we still offer nothing over 75 per cent LTV and a bespoke approach that includes individually underwriting each case and not the tick-box approach of the high street banks.”

Such an approach, he added, has helped beat off competition from high street banks and steered the building society through the financial recession. Although Mr Marsden, a regulatory accountant who worked for investment trusts in London, first joined Harpenden in 2001 as finance director he did not become chief executive until the start of the recession.

On taking the reins during this tricky time, he said: “I took over as chief executive in January 2007, but my old boss didn’t actually leave until after the annual general meeting in April. I had about three months at best before Northern Rock went bust.

“We found it really straightforward to navigate through the recession. We have a model that we stick to and during the recession we have never fallen lower than the top 6 for profitability of our assets in the sector.

“Our margins are administered, so basically we manage them. They do not track any movements in the base rates and that has enabled us to remain profitable during the recession. Being able to control our interest rates as far as possible is a massive benefit.”

Mr Marsden also emphasised the importance of the building society’s network of local high net-worth clients and how it is able to outmanoeuvre the high street banks through its more personal offerings and focus on specialist mortgage products. He added: “Most investors and savers are looking for competitive rates in a low-interest rate environment and if you have a fair offering and don’t have rates that fall off a cliff because they are on restricted terms, the trust builds.

“Once members are with us they tend to stay with us. It is the same on the mortgage side. We don’t get many who remortgage away from us. On the savings side, aggregator websites have helped us, while with mortgages we receive lots of recommendations from brokers.”

Harpenden Building Society has profited from a recent surge in the property market and, according to Mr Marsden, this year it broke its record for the highest number of mortgage-related enquires. Its mortgage business was up 200 per cent for 2013, which Mr Marsden attributed not only to improving markets but its specialist lending products that cater more to borrowers requiring complex arrangements.

From its 22,000-plus membership, the number of borrowers is around 1000. Its number of investing members, however, is more than 21,000, which Mr Marsden said is mostly linked to the fact that its saving vehicles cater to a more mainstream audience. According to Mr Marsden, Harpenden Building Society offers a range of commoditised products like Isas and bonds and also boasts one of the highest proportions of children savings accounts in the sector.

In addition, he explained that aggregator websites have increased the exposure of Harpenden Building Society’s competitive savings range, which in turn has transformed the mutual organisation into a national name.

Despite having just six branches, the chief executive said its members now live all over the UK, with some coming from as far afield as Newcastle. This, he explained, has been boosted by postal and online accounts, which he claimed “is a convenient way for people to transact with the building society without coming into a branch”.

Whereas some building societies maintain a local or regional focus, Mr Marsden is more than happy to accept membership from all over the country. However, that has not taken anything away from its local community projects, with the building society still playing an active role in Harpenden and its surrounding areas.

In the past two years the building society twice won Corporate Social Responsibility awards and Mr Marsden won a leadership award in 2013 for his own contributions, as well as being invited to Downing Street by Samantha Cameron for his company’s charitable contributions.

He added: “We are really engaged with the community and support charitable organisations or even loosely led groups in the form of sponsorship for school fêtes and fundraising events through to wider things through our two trust funds, which give out larger donations.

“We have helped to build Scout huts and school playgrounds when funding dried up. We also funded vehicles for the disabled. Overall, despite now having members all over the UK, we still primarily want to give back to the local community.”

These efforts have increased even more this year as part of the building society’s 60th anniversary. To celebrate 60 years of continued developments in the local community, last year Mr Marsden and Harpenden Building Society pledged to sponsor a minimum of 60 charities.

Things may have changed drastically since the building society was first conceived in the midst of post-war Britain, but to the organisation, its loyal members and second chief executive, the same values that saw it rise from four to more than 21,000 members have remained integral to its continued success.

Daniel Liberto is a features writer of Financial Adviser

Key points

■ The transformation of Harpenden from a small Hertfordshire village into an affluent commuter town can be closely linked to its prosperous, community-led building society.

■ The building society’s network of local high net-worth clients is important and the mutual is able to outmanoeuvre the high street banks through its personal offerings.

■ In the past two years Harpenden Building Society twice won Corporate Social Responsibility awards.