The Future of Building Societies
Sir Mark Boleat
Financial Services Trade Body Executive
In the final video of the series, Sir Mark Boleat discusses the current issues and the development of building societies across the world.
In the final video of the series, Sir Mark Boleat discusses the current issues and the development of building societies across the world.
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The Future of Building Societies
5 mins 52 secs
Key learning objectives:
Identify the main challenges facing building societies, including regulation, competition and housing-market exposure
Compare the UK building society model with similar housing-finance institutions in other countries
Explain how building societies have adapted while retaining their mutual status, savings-funded model and focus on residential mortgages
Overview:
Building societies remain significant mutual financial institutions, but their future depends on adapting to a changing market. They face regulatory cost, intense competition, housing affordability pressures, digital expectations and renewed interest-rate challenges. At the same time, recent consolidation has shown that mutual ownership is still evolving, not simply declining. The sector continues to play an important role in savings, mortgage lending, first-time buyer support and community presence, while retaining its distinctive focus on member value.
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Summary
What challenges do building societies face today?
Building societies continue to play a stable role in the UK financial system, offering savings and mortgage products through a simpler business model than most major banks. However, the sector faces several pressures. Regulation has become more demanding since the financial crisis, increasing the cost of compliance, capital management and conduct requirements. Competition has also intensified, not only from banks, but from challenger banks and digital-first providers competing for savings and mortgage customers.
How does the rate environment affect building societies?
Building societies operate across changing interest-rate cycles. The script refers to very high mortgage rates in the early 1990s, while the sector later operated through a long period of ultra-low rates. The more recent environment is different again: Bank Rate is currently 3.75%, creating pressure on both sides of the balance sheet. Savers expect stronger returns, while borrowers face affordability pressures from higher mortgage costs.
Why does housing-market risk matter?
Building societies remain specialist institutions with a strong focus on residential mortgage lending. That means they are exposed to housing-market conditions. A downturn can affect borrower affordability, arrears, credit losses and confidence in the mortgage market. Historically, rising house prices helped make mortgage lending relatively safe, but the sector still has to manage periods of weaker activity, affordability pressure and regional variation in house prices.
How is the mutual sector changing shape?
The sector is no longer defined only by building societies converting into banks. Recent deals show movement in the other direction, with shareholder-owned banks being brought into mutual-owned groups. Virgin Money’s business transferred to Nationwide in April 2026, while Coventry Building Society completed its acquisition of The Co-operative Bank in January 2025.
What do these deals signal?
These deals suggest that the mutual model is still evolving. Larger mutual groups may be able to use scale to broaden their product range, invest in digital capability, support branch and service networks, and compete more directly with banks. This does not remove the traditional building society model, but it shows that mutual ownership can remain relevant in a larger and more competitive financial system.
How have similar institutions developed internationally?
Building societies originated in England and the model spread mainly to English-speaking countries. Variations developed elsewhere, including savings and loan associations in the United States and Bausparkassen in Germany and Austria. Other countries use different housing-finance models, such as mortgage banks funded by long-term bonds. The comparison helps show that the UK building society model is distinctive, especially in its combination of mutual ownership, savings funding and residential mortgage lending.
Why do building societies still matter?
Building societies and mutual-owned banks continue to play a significant role in UK financial services. They account for 32% of first-time buyer lending, 46% of Cash ISA balances and 35% of high-street financial branches. These figures highlight their role in supporting home ownership, rewarding savers and maintaining community financial access.
What is the future of building societies?
The future of building societies depends on balancing continuity and change. Their distinctive strengths are member ownership, savings-funded lending, residential mortgage expertise and community trust. Their challenge is to preserve those strengths while adapting to regulation, digital expectations, competition, housing affordability pressures and changing interest-rate conditions.
Building societies continue to play a stable role in the UK financial system, offering savings and mortgage products through a simpler business model than most major banks. However, the sector faces several pressures. Regulation has become more demanding since the financial crisis, increasing the cost of compliance, capital management and conduct requirements. Competition has also intensified, not only from banks, but from challenger banks and digital-first providers competing for savings and mortgage customers.
How does the rate environment affect building societies?
Building societies operate across changing interest-rate cycles. The script refers to very high mortgage rates in the early 1990s, while the sector later operated through a long period of ultra-low rates. The more recent environment is different again: Bank Rate is currently 3.75%, creating pressure on both sides of the balance sheet. Savers expect stronger returns, while borrowers face affordability pressures from higher mortgage costs.
Why does housing-market risk matter?
Building societies remain specialist institutions with a strong focus on residential mortgage lending. That means they are exposed to housing-market conditions. A downturn can affect borrower affordability, arrears, credit losses and confidence in the mortgage market. Historically, rising house prices helped make mortgage lending relatively safe, but the sector still has to manage periods of weaker activity, affordability pressure and regional variation in house prices.
How is the mutual sector changing shape?
The sector is no longer defined only by building societies converting into banks. Recent deals show movement in the other direction, with shareholder-owned banks being brought into mutual-owned groups. Virgin Money’s business transferred to Nationwide in April 2026, while Coventry Building Society completed its acquisition of The Co-operative Bank in January 2025.
What do these deals signal?
These deals suggest that the mutual model is still evolving. Larger mutual groups may be able to use scale to broaden their product range, invest in digital capability, support branch and service networks, and compete more directly with banks. This does not remove the traditional building society model, but it shows that mutual ownership can remain relevant in a larger and more competitive financial system.
How have similar institutions developed internationally?
Building societies originated in England and the model spread mainly to English-speaking countries. Variations developed elsewhere, including savings and loan associations in the United States and Bausparkassen in Germany and Austria. Other countries use different housing-finance models, such as mortgage banks funded by long-term bonds. The comparison helps show that the UK building society model is distinctive, especially in its combination of mutual ownership, savings funding and residential mortgage lending.
Why do building societies still matter?
Building societies and mutual-owned banks continue to play a significant role in UK financial services. They account for 32% of first-time buyer lending, 46% of Cash ISA balances and 35% of high-street financial branches. These figures highlight their role in supporting home ownership, rewarding savers and maintaining community financial access.
What is the future of building societies?
The future of building societies depends on balancing continuity and change. Their distinctive strengths are member ownership, savings-funded lending, residential mortgage expertise and community trust. Their challenge is to preserve those strengths while adapting to regulation, digital expectations, competition, housing affordability pressures and changing interest-rate conditions.
Subscribe to watch
Access this and all of the content on our platform by signing up for a 7-day free trial.
Sir Mark Boleat
Sir Mark Boleat has held a wide range of board level appointments in the UK and Jersey. He is currently the Chairman of LINK, Eldon Insurance Services and the Governors of the City of London Academy Highbury Grove. Sir Mark is also Vice Chairman of the Advisory Board of the International Business and Diplomatic Exchange.
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