Unlocking the Potential of Building Societies: In Conversation with Rob Pheasey
From savings to mortgages, the nation’s building societies are making a real difference to people and places across the country. With MPs set to vote on a Bill that could increase the sector’s impact, PoliticsHome sat down with Rob Pheasey, Chair of the Building Societies Association, to learn why he thinks mutuals are striking a chord with a new generation of customers.
In an age of challenger banks and digital start-ups “disruption” has become an increasingly common term in boardrooms and policy think tanks.
However, in some ways, building societies are the original disruptors in the financial services industry. In the late 18th and early 19th centuries, they offered an entirely new model for borrowers and savers. It is fair to say that building societies were “doing ESG” over a century before that very modern phrase was first coined.
It is a heritage and legacy that Rob Pheasey, Chair of the Building Societies Association, is acutely aware of. However, what is striking during our sit-down conversation is that whilst proud of the sector’s roots, his unwavering focus is on meeting the needs of current and future borrowers and savers.
In 2023, finding new ways to meet those changing needs has been particularly important. Rising interest rates and a squeeze on household incomes have impacted across the country, resulting in many people struggling to get onto the property ladder. At the same time, savers required easy access to their money and were seeking competitive rates in a high inflation environment.
Despite wider economic challenges, Pheasey is proud of the impact that building societies have made. Initiatives like the BSA’s UK Saving Week are encouraging UK savers to build a savings cushion that can increase the resilience of household finances. At the same time, introducing more accessible and affordable mortgage products is unlocking home ownership for millions.
“Last year (Jan-Sep 2023), UK building societies accounted for a quarter of all new mortgage lending in the UK,” Pheasey tells us. “Yes, there were challenges, but that is a huge contribution.”
Pheasey also highlights the particularly important role that building societies are playing in supporting first-time buyers, who act as an engine that drives the wider housing market. In the first nine months of last year, over half (55%) of all building society lending for property purchases went to first-time buyers, helping over 70,300 households buy a place they can call home.
The strong core values that led to the formation of building societies more than a century ago are part of the reason that they are now so successful in helping those at the start of their property journeys and those who require a safe home for their savings. Whilst building societies are rapidly embracing technology to connect with their members, aspects of their business model remain curiously old-fashioned.
“There is no ‘computer says no’ attitude because we largely still use individual underwriters,” Pheasey explains. “Of course, technology supports decision processes, but we still take a very personal approach in appraising an individual case. That is the most important aspect.”
This is just one of the areas where, as Pheasey puts it, “building societies feel different”. It is a difference that is finding favour with a new generation of savers and borrowers who are increasingly drawn to businesses that are driven by a clear set of values. The mutual structure has hardwired those values at the core of how building societies work.
“We've always been different to the banks in terms of our business model,” he explains “Savers and borrowers are looking for organisations that are purpose-led and building societies have always been positioned in that context. That is a wonderful opportunity for the mutual sector to grow its members and to have a stronger voice in the financial services sector”.
The mutual model that Pheasey describes is not just core to how building societies operate. It is also at the heart of a range of other businesses including cooperatives and credit unions. The 42 building societies represented by the BSA serve over 26 million consumers and have total assets of over £506 billion, providing consumer choice and contributing to a more inclusive, growing and diverse economy.
And it is not just members who feel the benefit. Building society branches continue to be a major presence in towns and cities up and down the country, often remaining as anchor tenants on high streets that other businesses have long since deserted.
Alongside justifiable pride in the sector’s contribution, what comes across most clearly when talking to Pheasey is a hunger to do more when it comes to helping solve the nation’s housing crisis.
If that is to happen, he tells PoliticsHome, some of the red tape that prevents mutuals from competing on a level playing field with their competitors must be removed.
An important opportunity to achieve that is on the horizon. MPs will shortly get the opportunity to help level that playing field, and through that unlock home ownership for many more people.
The Commons is scheduled to debate a Private Members Bill introduced by Labour MP for Sunderland Central, Julie Elliott which is seeking to amend the 1986 Building Societies Act to change the way that funding limits are calculated.
It is a good example of the way a technical change can deliver very real benefits for the public. Whilst the technicalities of the Bill might not be widely debated in pubs and workplaces across the UK, the impact could benefit by families seeking to get onto the property ladder.
If the change is agreed, Pheasey tells us, building societies would not only be able to offer more mortgages but also do so at more affordable rates to hard-pressed customers.
“Getting people into home ownership is a shared problem and building societies are a huge part of the solution,” he tells us. “I hope that MPs look at the track record that the building societies have had in their constituencies, particularly for first-time buyers. The change that we're asking for is relatively small, but quite simply it would allow us to do more of what we do very well.”
It seems that the original financial sector disruptors still have the ambition to do much more. If they succeed in that mission, then it is ordinary families across the UK that will ultimately feel the benefit.
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