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Consumers
Building societies generally offer a better deal to the consumer because they do not have to pay dividends to shareholders. Accordingly they are able to offer lower mortgage rates and higher savings rates to their customers than other institutions. This is not just the view of the BSA and building societies, but of a number of external commentators - regulators, journalists, MPs, analysts, academics and others - as the following selection of comments shows.
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- One of the great strengths of building societies is the ability to make quick decisions and be fleet-footed in the marketplace.
Stephen Williams
Head of Building Societies Team, Deloitte
20 December 2006
- Mutuals are generally well trusted by UK consumers, so by strengthening their position in the market and putting the customer firmly first, they can continue to offer good value products and challenge the banks.
Nick Sandall
Head of Retail Banking, Deloitte
20 December 2006
- Building societies dominate the best-buy tables for cash-based Child Trust Fund accounts
Sunday Express
10 December 2006
- While complaints about lousy service from banks are common, I receive virtually none from building society customers.
Liz Dolan
Sunday Telegraph
12 November 2006
- The old argument about banks and other quoted companies having to hand over a large chunk of their profits to shareholders, whereas societies can hand the whole lot back to their customers in the form of better rates, still holds good in my book.
Liz Dolan
Sunday Telegraph
12 November 2006
- Mutuals are well placed to build local loyalty by making a special contribution to local community life and the delivery of public services. They are committed to supporting the communities in which they operate and are often based in the regions, bringing them closer to their customers.
Ed Balls MP
Economic Secretary to the Treasury
Speech to BSA Annual Lunch
9 November 2006
- As mutual institutions, building societies are owned collectively by their members - investors and borrowers -without external shareholders in the conventional sense. The benefits of efficiency and innovation are passed directly to members. And many operate with lower cost ratios than plcs.
Ed Balls MP
Economic Secretary to the Treasury
Speech to BSA Annual Lunch
9 November 2006
- Building societies are particularly successful in the new savings markets created by government initiatives. Mutuals have embraced the Government’s policy aim of promoting a responsible savings culture: they are leading the way in establishing Child Trust Funds and ISAs.
Ed Balls MP
Economic Secretary to the Treasury
Speech to BSA Annual Lunch
9 November 2006
- Societies in general provide the public with excellent value for money, with interest spreads much lower than banks..... Similarly societies are generally frugally run with several having management expense ratios of under 0.6%.
Building Society Database 2006
KPMG
September 2006
- Mutuals are unlikely to disappear. Many offer excellent service to their local community. They can give you a better deal than banks, and the competition they provide keeps banks from behaving (too) badly.
Daily Mail
16 September 2006
- Despite the pessimism about their future at the start of the century, the mutual building societies have seen their total assets grow from £171 billion in 2001 to £265 billion today....Nationwide has led the mutual charge [but] mutuals such as the Yorkshire and the Leeds are not shy to come forward with aggressive pricing and strong mortgage deals. The best-buy tables... are stocked with strong fixed rate deals from building societies.
The Times
13 September 2006
- In this competitive market, operating as a large mutual seems an attractive business model.
Financial Times, The Lex Column
13 September 2006
- Being a mutual brings its own culture.... the key difference for me is there is genuine warmth for the customer and business. There is more of a family feel. People feel they are there to do the right thing. That's part of the culture.
Mike Rogers, newly recruited from Barclays Bank as Chief Executive of Liverpool Victoria Friendly Society, quoted in The Daily Telegraph
21 August 2006
- Introducing and withdrawing savings accounts with regularity makes the UK savings market difficult to comprehend and use. This high level of deposit account turnover is not common to all firms... Most high street banks and mutual building societies launched only a modest eight to 12 new accounts between 1993 and 2004. However, other financial services companies such as converted building societies introduced an average of 24 new deposit accounts over this period, with some firms launching in excess of 40 new deposit accounts.
The huge growth in the number of similar savings products is driven by the profit motive. Firms which really need to make profits from customers' savings have launched far more new products than other companies.
Dr John Ashton of Norwich Business School, commenting on the publication of “Product Innovation and Consumer Choice in the UK Financial Services Industry”, 2006, Costanzo, L A and Ashton, J K, Journal of Financial Regulation and Compliance, Vol 14, No 3.
3 August 2006
- The objective of our Bank is to create value for the shareholders, not to be either innovative or not innovative. We will take whichever route makes the most money for the shareholders.
Retail Bank, Head of Business Strategy, in Costanzo, L A and Ashton, J K, 2006, “Product Innovation and Consumer Choice in the UK Financial Services Industry”, Journal of Financial Regulation and Compliance, Vol 14, No 3.
3 August 2006
- A general theme that emerged is that people seem to be more likely to trust building societies than banks. Building societies are perceived to be more ethical than the big high street banks and better at looking after their customers
‘I think banks are rip-off merchants. I don't like banks but I don't mind building societies. I think they're fairer.’
Account Opener, Manchester
‘Certain ones I wouldn't trust - they're out to make as much money as possible out of you, like Barclays. That’s why I'm with Nationwide. Nationwide do try to look after their customers – they were one of the few fighting to not charge customers for withdrawing money from machines.’
Account Opener, East London
Both quotes from HM Treasury, Interim Report into the Second Saving Gateway Trial
19 July 2006.
- The irony is that while former mutuals such as Woolwich have clearly lost their way since floating on the stock market, the Nationwide Building Society, which has fought the corner for the mutual cause, is winning plaudits aplenty. Woolwich customers could do worse than pop into their local Nationwide branch to find out why.
Sunday Telegraph
2 July 2006
- The important thing is to remember is that building societies do not behave in the same way as plcs. Just because a society is small, does not mean it is a potential takeover target. In many cases, the smaller societies are tied closely to their communities and while they may not have national brand recognition, they carry the old ethos of providing services for the local area, more than existing to make money.
Financial Adviser Editorial Comment
15 June 2006
- Mutuals steal the ‘mortgage’ show at the Moneyfacts awards
The winners of the 2006 Moneyfacts Awards were announced on 9 June at the prestigious Brewery venue in London, with mutuals having a very successful day, dominating the mortgage awards for the second year in a row.
Overall, mutuals took almost 75% of the top three places in the nine mortgage categories, building further on last year’s impressive performance of 60%.
Scott Hanton, moneyfacts.co.uk
14 June 2006
- The building societies make a winning case for mutuality. In this era of branch closures and overseas call centres, there is a place for banking services run for the benefit of customers rather than the enrichment of shareholders.
Antonia Senior, Personal Finance Editor, The Times
27 May 2006
- I'm a great fan of building societies in general, believing they can offer good value on savings and mortgages while playing a role in their community.
Tony Hazell, Personal Finance Editor, Daily Mail, Writing in Financial Adviser
18 May 2006
- High charges, paltry interest rates and poor service are common customer gripes but you can avoid them if you search out the best accounts. Most are provided by building societies, which do not have to pay shareholder dividends.
Sunday Times
7 May 2006
- Mutuals, such as building societies, are owned by their members, so any profit goes to them in cheaper loans, better returns on their savings and better service. A recent all-party Parliamentary probe concluded that we've all suffered from the wave of flotations by former mutuals. As it has resulted in widespread branch closures, big job losses, poorer service and fee-charging by many cash machines.
John Husband, Daily Mirror
3 May 2006
- Mutuals in recent years have outperformed their plc rivals in a variety of financial indicators and...these cost advantages have been passed onto customers. Diversity has been a strong feature of the UK financial services sector and demutualisations have weakened it - to the detriment of the British consumer. The values and benefits of mutuality ... have had an undeniably positive effect on the UK financial services sector.
Ian Welch, Head of Corporate Communications, Association of Chartered Certified Accountants, Letter published in the Financial Times
28 April 2006
- A recent cross-party committee of MPs scrutinised the general concept of mutuality and highlighted a lot of concerns. Windfalls or Shortfalls? a report released in Parliament on 7 March, concluded that previous demutualisations have had a largely negative impact on choice and financial services provision. Mutuals generally do better than their plc rivals in terms of financial performance but their "strategic direction" may "push" boards towards going public, it found. Research for the report showed that any windfall the members may get on conversion soon disappears in lower returns and higher costs. Customers typically lose their windfalls to higher charges and less competitive rates within four years of demutualisation.
Esther Shaw, Independent on Sunday
26 April 2006
- I'm a big supporter of the concept of mutuality, particularly in the building society sector. It seems pretty obvious to me that a business that has to share profits between customers and shareholders is likely to offer a less attractive deal than one that only has to serve the former group.
David Prosser, The Independent
22 April 2006
- Publicly quoted companies have a duty to shareholders as well as customers, and the interests of the two must be balanced. As a result, the MPs warned demutualised companies' charges have a tendency to creep up over time, while savings rates and loan rates are often only competitive for the newest customers. Mutuals however, can put their customers first, which should in theory enable management to survive on slimmer profit margins, with more money left over for policy holders. The MPs report found that customers could lose the value of their windfall in higher charges and less competitive rates within four years of demutualisation. It warned that mutual customers tended to lack "a full understanding of what they were voting for" at decision time.
The Independent
8 April 2006
- Mutuals tend to offer more competitive mortgage rates than banks, both intitially and over the long term.
Mail on Sunday
12 March 2006
- MPs found that the demutualisations of the 1990s have restricted the choice open to consumers. Those mutuals that remain have acted as a brake on unpopular actions by plcs, such as closing local branches or charging for the use of cash machine.
Sunday Telegraph
12 March 2006
- Mutual building societies and life offices give consistenly better value for mortgages, savings and endowments than their plc conterparts, according to a damning report from a cross party committee of MPs
Sunday Telegraph
12 March 2006
- Millions of customers of former building societies - such as Abbey National, Alliance & Leicester and Birmingham Midshires - were short changed when their provider demutualised and converted into a bank, according to a report published by a cross party committee of MPs yesterday.
The Independent
8 March 2006
- Rachel Thrussell, head of savings at analysts Moneyfacts, says that when societies convert to banks, it has an effect on their products. Converted societies, including Alliance & Leicester and Bradford & Bingley, are no longer as competitive, when it comes to rates, as they were when they were societies.
Sunday Express
5 February 2006
- Its also more likely that your local building society branch will stay open. Since 1995, societies have closed proportionally fewer branches than banks. The societies' network has been reduced by 5%, against 27% for the banks.
Sunday Express
5 February 2006
- Current loan performance at building societies continues to compare well against averages for the rest of the mortgage market, with arrears levels being substantially lower.
Financial Services Authority, Financial Risk Outlook, January 2006
25 January 2006
- In fact this survey continues to underline the competitiveness of the mutuals, who occupy over half of the top 25 positions.
Moneyfacts SVR Mortgage Survey Press Release - "Mutuals and Direct Lenders leading the way"
4 January 2006
- Britain's biggest banks are among the most expensive mortgage providers in the country, research to be published today will reveal.
The Independent
2 January 2006
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