Stroud & Swindon Building Society, the 160 year old mutual society, has merged with Coventry Building Society in a deal that will see around 200,000 customers move to the third largest building society in the UK.
The merger means that Coventry’s membership will increase from over 1.2 million to around 1.5 million, while overall assets under management will be boosted to £18.4 million. But the best news for Stroud & Swindon customers is that a significant number will see interest rates on their mortgages drop to match Coventry’s levels, and hundreds of thousands will benefit from a rise in interest rates on their savings accounts.
Why have Coventry and Stroud & Swindon building societies merged?
The ravages of the economic crisis in 2008 and 2009 were not kind to financial institutions, especially small mutual societies. Mutuals are companies with no shareholders, and which are instead owned by their members. Stroud & Swindon, in particular, had a tough time. Its reported mortgage losses in 2009 were £2.6 million, but its major problem was that it did not have enough capital to cover its costs and could not attract cost-effective funding.
Coventry, on the other, is a very robust institution. It delivered pre-tax profits of £56.2 million last year and retained strong credit ratings throughout the credit crunch. After over six months of due diligence, Coventry decided that a merger with Stroud & Swindon would not only rescue Stroud & Swindon’s fortunes but benefit its existing customers while expanding its business.
What impact will the merger have on Stroud & Swindon customers?
For now, nothing will change. Coventry has pledged to keep the 22 Stroud & Swindon branches open for at least the next 12 months, and aims to integrate all of the Coventry and Stroud & Swindon branches to create a 70-strong network by the end of 2011. Around £4 million will be invested to refurbish and upgrade the Stroud & Swindon branches.
No account details will change, and payments into Stroud & Swindon accounts will remain the same.
However, the greatest benefit that Stroud & Swindon customers can expect is an uplift on their saving account rates and lower variable mortgage rates, in line with what is offered by Coventry. Coventry estimates that two thirds of Stroud & Swindon’s 251,000 savings accounts will benefit from an increase in rates across its product spectrum.
Meanwhile, an estimated 4,200 Stroud & Swindon members currently repaying a mortgage on the society’s standard variable rate (SVR), currently at 5.99%, will see this drop to Coventry’s lower SVR of 4.74%. This means that on a loan of £100,000 repaid over 25 years, monthly repayments will drop from £643 to £569.
I am member of both Stroud & Swindon and Coventry – what will happen to my savings protection?
When you place your money in any authorised financial institution, your savings are protected under the Financial Services Compensation Scheme (FSCS). If the bank or building society you are saving with goes bust, you’ll get back a maximum of £50,000 per individual, per financial institution – so it’s important not to hold more than this sum with any single institution. For more information on how the FSCS works, and for help with spotting which banking brands belong to the same financial institutions, read the Which? guide.
If you currently have savings with both Stroud & Swindon and Coventry, you will have ‘dual coverage’ – meaning up to £50,000 protection in each institution, or £100,000 – until 30 December 2010. After that date, you will only have coverage up to £50,000. This only applies to people that had accounts with both societies before the merger took place.
Look up the Best Rate mortgage deals and Best Rate savings accounts on the newly-relaunched Which.co.uk website.
Which? Money when you need it
You can follow @WhichMoney on Twitter to keep up-to-date with our Best Rates and Recommended Provider product and service reviews.
Sign up for the latest money news, best rates and recommended providers in your newsletter every Friday.
Or for money-saving tips, and news of how what’s going on in the world of finance affects you, join Melanie Dowding and James Daley for the Which? Money weekly money podcast
For daily consumer news, subscribe to the Which? news RSS feed here. And to find out how we work for you on money issues, visit our personal finance campaigns pages.