UK building societies buck market to provide mortgage growth

Several mutuals have introduced ‘new and innovative ways to support people into homeownership’, says sector body BSA

Building societies’ mortgage balances grew in the six months between October 2023 and March 2024, when they had declined across the rest of the market, new figures reveal.

At the same time, the sector saw savings balances and service levels continue to outperform those at banks, says the Building Societies Association (BSA).

This follows a slowdown in the housing market in 2023, with new mortgage approvals picking up in recent months, which the BSA says is supported by strong wage growth, falling inflation and higher levels of consumer confidence

The latest lending data shows that mortgage balances at building societies increased in the six months to March 2024 by £8.6bn. In the same period, mortgage balances at other lenders reduced by £10bn. This continues the trend seen throughout 2023 where building societies accounted for all the growth in the mortgage market.

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Building societies’ lower risk approach to lending decisions is reflected in the latest arrears data where 0.25% of building societies balances were in arrears at the end of Q4 2023, compared to 0.69% across the total market.

The BSA also notes that a number of building societies have introduced “new and innovative ways to support people into homeownership”, and in the six months to March 2024 they have helped 49,844 first-time buyers to buy a home of their own. This accounted for 37% of all residential building society lending.

Despite the cost of living crisis, the savings market has grown during the six months to March 2024, the BSA adds. 

“Building societies continued to offer competitive rates throughout this period”, it says. The sector has attracted £14.7bn in cash savings, accounting for more than one third (35%) of all savings. Savings balances at banks and other deposit takers increased by £27bn.

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Its figures also show that building society savers received £2.1bn more in interest than they would have got at the big banks over 2023, “showing how shopping around can make a sizeable financial difference”.

In the latest YouGov customer service survey, building societies once again outperformed their banking competitors in various customer service metrics.

92% of building society customers agreed that their provider gives good customer service, compared to 87% of bank customers. The survey also reported that around three quarters (75%) of building society customers said their building society is an important part of the community, considerably higher than the 49% of bank customers.

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