Better interest rates

The low interest rate environment that has prevailed since 2009 has been challenging to all financial institutions.

However, independent bodies that monitor interest rates across the market have recenlty highlighted the generally superior rates on offer at building societies compared to other providers.

For example, Moneyfacts noted that "Building societies are winning the mortgage battle" (Jan 2018) Charlotte Nelson of Moneyfacts said: "Building societies are offering borrowers a better deal when it comes to rates. For example, the average five-year fixed rate mortgage from a building society is a whopping 0.41% lower than that of one offered by the main banks"

Charlotte continued, "Building societies clearly want to be seen as supporting first-time buyers, and offering lower rates is just one of the ways they can do this. This group of lenders also tend have a more flexible underwriting process, allowing to them to more flexibly consider the needs of these borrowers."

And found that on the savings side (Jan 2019) in 2018 that 66% of building society accounts paid a higher interest rate than the base rate, compared to only 49% of accounts held with banks.

Tom Adams of Savingschampion commented, "When it comes to the average rates, there is a clear disparity between the two groups and it demonstrates that building societies on the whole pay higher rates and are therefore treating savers more fairly than banks."

Separately, using the same approach as the Bank of England does for its average interest rate data, the BSA has found that savers with building societies earned £460 million more interest in the first six months of 2018 than they would have done if they'd earned the average rate across the Bank of England's sample of major savings providers.




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Andrew Gall

Head of Savings & Economics