The strategy of Darlington Building Society Deputy Chief Executive

There are some basics that everyone should feel are within their reach, from a living wage, to a happy family to a safe and secure home.

For Chris Hunter - responsible for the Business Transformation, IT, Operations and Lending Department at Darlington Building Society - the three are inextricably linked.

We all need to have aspirations and goals, and these goals need to be achievable, and locally if there is a living wage, then we can afford a safe home and feel that we are doing our best to keep our families happy.

That’s the difference with the Society - whilst some lenders will close the door to complexity and seek simple mortgage cases, Chris and his lending team want to make “complex simple” and find mortgage solutions to enable home ownership for as many borrowers as possible .

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As an example, with first-time buyers, Chris has been at the table many times as that conversation takes place from people who simply can’t see their way through the front door, but he sees it is a clear priority to provide the key each time, whatever the customer’s circumstances.

He tells me: “At the moment, I think there seems to be a contrast of people that are either in a good position, have their own home and a mortgage or they own their home and with no mortgage, or are in the private rented sector and feel that home ownership is out of reach.

“From our perspective, we focus mainly on residential lending - people and their mortgages, which is about 95% of our businesses. I think those people that are on the housing ladder and have a mortgage are in a good place, particularly those that have had a mortgage in the last three to five years that have already seen the benefits of lower interest rates.

“Those that have bought housing in the last 12 to 18 months are probably sitting on house prices which are quite flat, if not coming down slightly and the mortgages that were taken in the last 12 to 18 months are more expensive than for people that took them three to five years ago.

“But at least they are on the housing ladder, are starting to pay back the capital and they’ve got their own home that they can feel secure in.

“What we’re seeing at present is the people without a mortgage - aspiring homeowners - who are struggling to move ahead with their home buying plans, because of mortgage affordability.

“Regulators, quite rightly after the financial crisis, asked lenders like Darlington Building Society to look closely at whether the buyer can actually afford the mortgage over the term and if interest rates increased.

“We’re a responsible business, trusted with people’s money, so we know this is the right thing to do. A stress test was introduced, the stressed mortgage payment is not what the payment is today, it looks ahead to what the possible interest rate rise might be in the future and asks would the borrower be able to afford it.

“Three years ago, a typical two-year fixed rate mortgage might have been 3% and the stress test might have been between 6% and 7%. You’re now looking at a mortgage rate of around 6%, so the stress test is between 8% and 9%.”

That leads to another of those turning-point conversations around the table. Chris’s team knows the customer can afford it now, and sees how close they are to their dream home, but has to apply what can be seen as an uncomfortably large amount of common sense to protect them in the long-term.

Darlington Building Society starts working with its borrowers even before they become customers, from the minute they walk through the door. It’s only after a full and frank look at what is on offer that both sides might decide the time is right to commit.

“Our advice will always focus on getting that individual into their home,” Chris says.

“What that might mean is that we extend the mortgage term, which brings down the mortgage payment, but obviously has consequences in taking leverage over 35 years rather than 25, so we would make sure that they continue to review their position through the life of the mortgage.

“One thing that we’re proud of in Darlington, is that we offer all our existing borrowers a new deal when their current rate matures, so that we don’t make anyone stay on our SVR rate - and we don’t do any new affordability checks on that.

“That internal product retention or product switch is something that we offer all our borrowers to enable them to not have to go through that stress test again and obviously keep them in their homes so they can continue to build their lives here.”

Chris Hunter. Pictures by Sarah Caldecott

To keep on top of that level of analysis and support, Chris has a number of teams in the lending department. The Mortgage Underwriting team are the ones who get involved in that crucial application to mortgage offer stage, to enable the home ownership. If the mortgage progresses to completion, then the Mortgage Operations team supports the new partnership with the borrower for the life of the mortgage. If there are any unexpected financial challenges along the way, the Financial Support team will be there to help plan a new route.

The depth of that operation is proving popular, with self-build and new-build mortgages – not always a popular area for lenders - particularly strong, with the Society going into partnership with local builders including Esh Housing.

It is the agility of the organisation that is enabling it to be so influential in the local mortgage market, it knows the local area and knows the impact of new build homes which provide much need supply and offers 95 per cent loan to value mortgages to open the door to those customers with less scope to build a deposit.

They know the geography because their staff drive through it every day and they know the demographic because they are their own ideal customer – from young singles to married couples and downsizers the Society comes with its own examples of how mortgages can work for almost every situation and how a long-term partnership can pass you seamlessly through each phase, supported at every step.

“There is a real feelgood factor about the region at the moment and I think we are a part of that with what we’ve achieved in the last four or five years coinciding with the Darlington Economic Campus and the progress at Teesworks.

“It all combines to give people a sense of security when they get their own home. So it makes great sense to us to try to improve that home ownership element, always recognising that there is much more to be done around social housing and making sure that there is provision for people who can’t get mortgages to support their own hopes.”

Twenty years ago it was his own parents who gave their son advice on navigating the housing market. The basic principles haven’t changed much since then, and while the market and the economy is a very different place, following Mr and Mrs Hunter’s approach still works for Chris.

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“I often think about that advice,” he says.

“They told me to take my time and get the best I could afford, and I think they followed the same advice from their parents when they bought their three-bedroom semi for £3,000 in 1970 when they got married.

“I think it is still the best advice to push yourself within safe limits to get the best you can. But do what you can from a borrowing perspective to try to fix your costs from the outset. Your income will increase over time, but if you can fix your mortgage payment to provide certainty over the initial period of home ownership it is one less thing to think about.

“I would try to get a fixed rate deal particularly for first time buyers, lock in your costs for five years and then concentrate on building your home together, building your life and building your career around that, knowing that your mortgage is safe and secure.”

However, Chris would advise if you are in a position to buy your own home you should speak to a Darlington Building Society Mortgage Advisor who will review your circumstances and provide advice tailored to your individual needs.

Those words are foundation stones for Darlington Building Society’s own growth - care security and growth work as well for them as they do for their customers.