Back in 1775, at the start of the industrial revolution when most working people were living in overcrowded slums, the landlord of the Golden Cross Inn in Birmingham stuck a tankard on the end of the bar and got his regulars to pool their savings. When there was enough money in the pot, they used it to buy land and build a home, drawing lots to determine which of them would get the home.  They all carried on saving until they had built a home for each member of the group, a life-changing event for those families and their community, and the birth of the first ever building society. 

This simple idea of people coming together to build stronger communities, create greater financial resilience and provide access to homeownership to the masses rather than the elite, remains at the heart of today’s building societies. 

Two and a half centuries on and building societies are still owned and run for the benefit of their members, the customers, which is reflected in their rates, products and service. Their culture, behaviour and decisions are different to banks who must focus on creating profits for their external shareholders rather than delivering value to their customers. 

Helping people to have a home of their own

That 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 time, 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 continuing to manually underwrite non-standard mortgage applications, rejecting the ‘computer says no’ approach of other lenders. 

Regulation can often be seen as a barrier to lending, but building societies don’t sit back and accept this, they campaign for smarter regulation and housing solutions. For example, 10 years ago it was the building societies who led a review of lending age limits to reflect the increased life expectancy and changing retirement habits of borrowers. 

Building societies also look for innovative ways to overcome challenges and lend within the regulatory framework. Examples of innovations available to today’s first-time buyers include Skipton Building Society’s no-deposit mortgage, Nationwide Building Society’s six-times income mortgage and Cambridge Building Society’s rent to home scheme, all of which support first-time buyers within the current regulatory framework. 

Building financial resilience

Helping people build financial resilience 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 growth in UK savings balances.

Recognising that there are many people in the UK with little or no savings to fall back on, and many others who could make more of their savings, it was the building society sector that created UK Savings Week – an annual campaign to help encourage better savings habits and improve resilience and mental wellbeing.

Supporting communities

A differentiator between building societies and banks is the support provided to the local communities. 
Not only are building societies much more likely to have a branch on the high street – in 2012 they accounted for 14% of the branch network, today it’s 30% - many are adopting a new approach to branches. Examples include co-locating with charities or community groups and hosting OneBanx kiosks where Open Banking provides a community with access to cash deposit and withdrawal services after they have been deserted by banks.

Overcoming challenges

Of course, the path over 250 years has not been all plain sailing for building societies, with probably the biggest challenge to the sector being within living memory. In the 1990’s 11 building societies chose a different path and de-mutualised to become banks. Not one of those banks is still standing as an independent organisation. Vince Cable, former Secretary of State for Business and Trade, described these de-mutualisations as “one of the greatest acts of economic vandalism in modern times”. 

The financial crisis of 2008 was also a challenging time for building societies, but the sector has emerged from these events leaner and stronger than ever before.

Looking ahead

We start our 250th year with a fantastic commitment from the government to double the size of the mutual and cooperative sector. This presents a unique opportunity to place building societies, along with other mutuals and credit unions, at the heart of Britain’s economy. We are very excited to work with the government and other mutual trade bodies to find innovative ways of making this happen.

We have also recently seen the first re-mutualisation of two banks, following the mergers of Nationwide Building Society and Virgin Money and Coventry Building Society and Co-operative Bank. These mergers will see mutual value and banking services becoming available to more individuals, families and businesses. 

Building societies will continue to tackle the challenges of low household financial resilience and difficulties in achieving and maintaining homeownership. I’m proud to work for a sector that has never lost sight of its 250 year old Purpose and which prioritises value and service over profit – long before anyone used the term B-Corp! (I’m also excited for the 250th commemorative beer that is brewing for the Building Societies Conference in May – registration is open if you fancy trying one with me). 

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. 

This article was first published in Mortgage Finance Gazette