Yorkshire mutual taps City for £500m

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YORKSHIRE Building Society has tapped institutional investors for £500m in a fundraising that was nearly two times oversubscribed.

Britain’s second biggest building society said the high demand for its residential mortgage-backed securities meant that it was able to borrow the money at a cheaper than expected rate.

The funding will help the Bradford-based mutual increase its lending to home buyers in the second half of the financial year.

Andy Caton, corporate development director, told the Yorkshire Post: “There’s not a lot of activity from UK lenders in the wholesale debt markets at the moment because of the Funding for Lending scheme.

“Everyone tends to use that because it’s cheap and we have now drawn £750m from scheme.

“But what we are trying to do is keep our normal funding activity going alongside that.”

The Bank of England launched the scheme to provide lenders with access to cheap money.

As well as increasing the amount of credit for borrowers, another consequence of the scheme has been to drive down demand for deposits, reducing the interest rates available to savers.

Executives from Yorkshire Building Society did a two-day roadshow in London last week with a final investor call on Friday morning.

It said the order book built quickly to around £1bn from more than 20 institutional investors, allowing it to tighten the pricing.

The mutual closed the deal on Friday afternoon with the sale of £500m AAA-rated notes on a final order book of £924m from 17 investors.

It said 87 per cent of the notes were sold to UK investors, 4 per cent to German and Austrian investors and the remaining 9 per cent into “other jurisdictions”.

The Yorkshire added that banks accounted for 57 per cent of the notes sold while asset managers and agencies accounted for 34 per cent and 9 per cent respectively.

Mr Caton said he was “extremely happy” with the result.

“It shows there’s a big appetite for for prime UK residential backed assets,” he added.

“There is lot of optimism about the housing market at the moment and investors are looking for something to their money into.”

Leeds Building Society completed its debut mortgage-backed securitisation in July, raising £300m.

It carried out the fundraising move in good time - comments from the US Federal Reserve soon after closed down the wholesale debt markets as investors fretted about the “tapering” of the US economic stimulus programme.

Yorkshire Building Society increased gross lending to £2.5bn in the first six months of 2013, compared with £2.4bn in the same period in 2012. It reported a pre-tax profit of £80.1m.