The first known building society was set up in 1775 by ordinary working people helping themselves to build their financial resilience and get a home of their own, by pooling their savings and using the money to buy land and build homes.
Two hundred and fifty years later and building societies are still providing a safe home for people’s savings and using these savings as the means for others to buy a home and creating thriving communities.
Those early building societies were set up and owned by their members. Today, all 42 building societies are still ‘mutually-owned’, in other words they are owned by their customers.
Being customer-owned means building societies are not driven to maximise profits, instead they make enough profit to keep the organisation safe and sustainable. Additional profits are then invested back into the business which is reflected in their rates, products, customer service and their communities. Their culture, behaviour and decisions are therefore different to banks who must focus on creating profits for their external shareholders rather than delivering value to their customers.
Building societies supporting homeownership
The mutual value is evident when you look at the stats – in the six months to September 2024 building societies grew their mortgage balances by almost £12 billion, accounting for 72% of all UK mortgage growth in the period.
During this six month period, building societies helped over 63,000 first-time buyers onto the property ladder, showing their continued focus on finding solutions to the challenges facing ordinary working people who aspire to be homeowners.
Many do this by taking an individual approach to reviewing mortgage applications, rejecting the ‘computer says no’ approach often adopted by banks. Others have innovative products and policies such as no-deposit or very low-deposit mortgages, six-times income mortgages and schemes such as rent to home, all aimed at helping more first-time buyers onto the property ladder.
Building societies supporting savings aspirations
Helping people to build financial resilience and make the most of their money is equally important to building societies as supporting people into homeownership.
In 2023, building society savers received £2.1 billion more in interest than if they had been paid the average rates offered by large banks. It’s therefore not surprising that in the six months to September 2024, building societies attracted £14.7 billion in cash savings, accounting for more than one-third (34%) of all the growth in UK savings balances.
There are sadly many people in the UK with little or no savings to fall back on, and with more than £250 billion in current accounts earning no interest, many others who have managed to build a savings pot that could make much more of it. The building society sector therefore created UK Savings Week, an annual campaign to help encourage better savings habits, leading to improved financial resilience and mental wellbeing.
Following the last UK Savings Week, 70% of people who had heard of the campaign had taken, or planned to take, positive action, such as increasing their savings or moving their savings to better paying accounts. Of those who engaged in the week, 26% started saving for the first time.
Building societies supporting communities
Building societies prioritise investing in their local communities and are much more likely to retain their high street branches. Their current share of UK high street branches is 30%*, more than double the proportion they had (14%) in 2012. Many building societies are also adopting a new approach to branches, such as co-locating with charities, community groups and local services, or hosting multi-bank kiosks to provide a community with access to cash deposit and withdrawals after the last bank in town has left.
No wonder 72% of building society customers said their provider is an important part of their community, compared to just 54% of bank customers. Building societies’ customers also rate their provider higher on customer service than bank customers rate theirs.
*Doesn’t include the branches of Virgin Money or Co-operative Bank which are now owned by building societies.
Commenting on the building societies 250th anniversary Robin Fieth, Chief Executive of the Building Societies Association said:
“We start our 250th year with a fantastic commitment from the Government to double the size of the mutual and cooperative sector. This recognition that our business model is different and benefits consumers presents a unique opportunity to place building societies at the heart of Britain’s economy.
“Today’s building societies have never lost sight of their purpose. They will continue to tackle the challenges of low household financial resilience and difficulties in achieving and maintaining homeownership with innovative and customer-focused products and services.
“It feels like this is our time, and I’m in no doubt that there will still be building societies providing a safe home for savings and the means for ordinary people to buy their own home in another 250 years.”
