1. The role of building societies Andy Caton Corporate Development Director Yorkshire Building Society The role of building societies

2. Agenda Introduction to YBS Market background A role for building societies Open Market HomeBuy The future?

3. Yorkshire Building Society 3rd largest building society 1.9 million members 131 branches & 71 agencies 1.3% UK mortgage market share Focus on residential house purchase Mutual - owned by our customers

4. Mortgage Market Background Boom in lending…but lower margins Competition & pricing Customer “churn” Growth in BTL & niche areas FTBs Link to mutuality ( 1) Alliance & Leicester, Bradford & Bingley, Northern Rock (2) Britannia BS, Nationwide BS, Portman BS Net Interest Margin Comparisons

5. A role for building societies Mutual model & historical role Building society initiatives YBS product initiatives YBS & Open Market HomeBuy

6. OMHB Illustration: How It Works House purchased for £150,000 and sold 5 years later at £180,000 12.5% Government Equity Loan £ 18,750 12.5% YBS Equity Loan £ 18,750 75% YBS Conventional Loan £ 112,500 20% increase in house price

7. OMHB Illustration: How It Works Exit Valuation & £180,000 sale price 12.5% Government Equity Loan £ 18,750 + £ 3,750 repaid 12.5% YBS Equity Loan £ 18,750 + £ 3,750 repaid £ 22,500 repaid to Gov ’ t £ 22,500 repaid to YBS £ 110,000 repaid to YBS Total paid back £ 155,000 Equity retained £ 25,000 75% YBS Conventional Loan £ 112,500 loan less any capital repayments over 5 years, say £ 2,500 = £ 110,00 outstanding

8. OMHB Illustration: Affordability £112,500 OMHB mortgage £142,500 conventional mortgage (95% LTV) £150,000 No Deposit FTB mortgage Rate = 6.50% £395 fee No HLC Monthly payment £759 Total paid over 5 years = £45,924 Rate = 6.35% No fee No HLC & £450 c/back Monthly payment £998 Total paid over 5 years = £59,416 Rate = 5.85% £595 fee £2,550 HLC Monthly payment £904 Total paid over 5 years = £57,345 £150,000 purchase: OMHB versus some alternatives

9. OMHB: Experience To Date Launch preparations YBS products & take-up Customers profile Feedback & improvements Issues & risks

10. Lessons from the past Risks for customers Risks for lenders Capital markets solutions (and lack of them) Some ideas Future development of shared equity lending

11. Conclusions Shared Equity has a role to play in assisting LCHO Success of YBS OMHB demonstrates a public/private solution can work Good fit with building society core purpose A case for more creative thinking A new business model required?

12. Your questions