Mortgage Matters article

Building societies in the industrial strategy debate

‘A new, more interventionist, industrial strategy, aimed at boosting the post-Brexit UK economy’. That was the billing given to the recent green paper released by the Department for Business, Energy and Industrial Strategy.

With explicit acknowledgement that ‘housing is a key factor in driving economic growth’ and no fewer than 21 mentions of housing throughout the paper, we can be confident in the Government’s desire to get post-Brexit Britain building at scale.

Also pleasing is the way that housing is spoken of in the same breath as infrastructure throughout the paper. BSA research last year found that, unsurprisingly, infrastructure investment in transport and other facilities is vital for getting positive buy-in from communities for new house-building.

That housing is thought of as infrastructure in itself is welcome, but it must also be supported by roads, schools, hospitals, shops and other vital amenities.

Unfortunately, there is less mention of the ways in which housing and, in particular, mortgage lending supports the economy in other ways. By enabling people to buy a house close to where work is available, mortgage lending supports employment and job growth in those areas.

This is where the industrial strategy links up with another important strand of Government policy – devolution. Crucially, devolving control and funding to the Northern Powerhouse and more-recently coined Midlands Engine are seen as vital for rebalancing the economy away from London.

Of course, building societies are strong local employers in these broad areas. Over half of BSA members are clustered in or around one of the two.

Building societies also support the economy by being strong lenders in these areas. The chart below shows that following the financial crisis, mortgage lending by building societies has rebounded across Northern and Midland regions. In the North West, for example, the value of all regulated mortgage loans went over £3.6bn in the year to September 2016.


With national broker networks now accounting for around 70% of mortgage lending it would be untrue to suggest that all this business was done by building societies headquartered there. Yet many continue to have strong market share in their local and regional economies, while clearly national lenders also play a significant role.

The green paper majors on finance as a means of growing SME businesses. With the Housing White Paper still due there could be good reason why mortgage lending has not received more attention in the industrial strategy and devolution debate so far.

Yet if housing is really going to play its role as a key factor in driving economic growth then clearly finance is an indispensable part of the equation.


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