Despite the credit crisis, the mutual sector has ensured its reputation remains intact and mutual lenders are finding new ways to grow their business and compete with the banks.

A growing number of building societies have found low risk, low LTV and profitable margins by serving the self-build market.

They aren’t the only ones looking for alternatives. With the slow recovery of housing market more people are looking at alternative ways to get a new home.

Building your own home is one option and has received unprecedented support from the UK government, as part of its drive towards localism through the new ‘Community Rights’.

The self-build market is performing relatively well, with demand for self-build land and finance showing steady growth.

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Building societies, like the government, have found common ground with the self-build ethos. Taking them back to the establishment of the first building society more than 200 years ago, many of them are getting back to their roots – funding the building of new homes.

The self-build model provides quality homes that meet people’s requirements and suit their individual lifestyles.

Estimates show that the number of UK self-build homes grew from around 2,000 units per annum in the 1970s, to a peak of around 17,000 in 2007. However, the aspirant market for self-procured homes is believed to be much higher at around 100,000 units per annum.

There is now greater recognition of the self-build model and its capacity to deliver a more robust and sustainable supply of quality housing, serving both the public and private sector housing markets.

The Minister for Housing, Grant Shapps, has pledged government support to grow the sector, to match levels of other European countries, which are up to five times larger than the UK market.

In a recent speech announcing more land release for self build, Mr Shapps said the government would ‘put its money where its mouth is’ to help people to build their own homes.

He said: “There is scope to significantly increase the number of self-built homes in the UK, both for individual households and for community-driven projects.

“I’m encouraged by the ongoing work of our self-build working group, which is making good progress in developing an action plan to reduce the barriers that aspiring self builders often face.

“These efforts will help bring self build into the mainstream and not simply be the preserve of the privileged few.”

It is increasingly important, particularly in the current climate, that home builders can access the right funding solution for their project.

BuildStore has created seven new lending partnerships with building societies in the last two years, so mutual lenders can deliver practical and profitable funding solutions to self builders. This allows the borrower to create the type of home they would otherwise not be able to find or afford on the open market.

The Chorley Building Society partnered with BuildStore to launch self-build mortgages last year and chief executive, Stephen Penlington, sees the potential for growth.

He says: “Self-build mortgages are becoming increasingly popular and Chorley Building Society is keen to position itself as specialist lender to the self-build market. In a way, self-build lending allows us to stay true to our values and to the reason building societies were originally established – helping people build their own homes.”

By going back to these roots, funding in this sector enables more people to create quality, affordable homes, helping communities stay together and grow organically. It also supports jobs in the construction industry – every £50m of lending creates 2,000 full-time construction jobs.

Furthermore, lenders are providing funding for experienced borrowers with an average LTV of 59%, and can benefit from low-risk, low arrears lending.

Furness Building Society is the latest lender to partner with BuildStore to serve this growing market.

Ian Bell, general manager (marketing and development) at Furness, says: “As a mutual society, we provide a wide choice of mortgage products to cover a range of options for those wishing to stay in, buy or create their own homes.

“The Furness likes to treat each mortgage application on its individual merits and this approach is clearly mirrored by those seeking individuality from their homes.”

He adds: “Self build can provide a huge contribution to local communities in the area that the Society operates, providing work for local trades people whilst giving those from the local area a potentially lower cost alternative to purchasing existing properties.”

Paul Broadhead, head of mortgage policy at the BSA, adds that the history of building societies fits well with the self build market culturally and commercially.

“At a time when we are facing a national shortage of housing with the knock-on effects on everyone from first-time buyers to key workers, self build can play a major part in supplying new homes to people who need them, where they are needed,” he says.

As the mortgage market continues its recovery, building societies have an ideal opportunity to diversify their lending into other areas.

Lending in the self-build sector offers social, economical and commercial benefits to societies and their members. With the government’s commitment to grow the market, the opportunity to fund a new generation of home builders is surely too significant to ignore.

Raymond Connor is chief executive of BuildStore Financial Services