The building society sector posted strong results for 2018. This continues the trend of strong performance by the since the end of the financial crisis.

Net lending by building societies (gross lending minus repayments) was £17.9 billion in 2018, up 12% on 2017 and a 39% market share. If we look at net lending by the sector from 2009 to 2018, it shows that societies accounted for close to half (46%) of total net lending in the UK mortgage market. After the financial crisis some of the larger banks moved away from residential mortgage lending, and building societies have been able to fill the void.

In recent years, larger banks have returned to the mortgage market which has seen an increase in competition, but societies have been able to still grow their market share by providing products and service levels that surpass that of their bank competitors.

In 2018 gross mortgage lending by building societies was £68.9 billion, a 26% market share of all lending in the mortgage market, and was up 7% on the £64.1 billion lent by building societies in 2017.

Lending volumes in 2019 are unlikely to grow significantly in 2019 as the uncertainty around Brexit continues to affect homebuyer sentiment. There is also an underlying weakness in the housing market as affordability concerns continue to affect first-time buyers and home-movers alike.

There were more first-time buyer mortgages completed in 2018 than in any year since 2006. 370,000 mortgage loans were advances to this group in the year¹. Building societies accounted for 31% of these first-time buyer loans, lending to over 115,000 individuals, which us up 5% on 2017 and the highest number for the sector since data was collected in 2005.  

Household savings balances grew by £46.7 billion in 2018, a modest increase of 2% on the £45.8 billion in 2017. However balances at building societies increased by £14.3 billion in the year, up 67% on 2017 and a 31% share of the increase in new savings balances in the year. Societies are clearly attracting savers, and recent data published by the BSA explains why. The data reveals that building society savers earned over £920 million more than if they had saved with a large bank.

Changes in savings balances is often volatile and are sensitive to various factors including the buoyancy of stock markets and other investments, income growth and inflation. With so much uncertainty surrounding the UK’s departure from the EU, and wages growing faster than inflation it is likely that savings growth could again show modest growth in 2019.

1) Data from UK Finance - https://www.ukfinance.org.uk/data-and-research/data/mortgages/lending-trends

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Press release: Strong Q4 boosts building society 2018 performance