The Building Societies Act was introduced in December and will have its second reading tomorrow. After the second reading, the bill will then go through committee stage and report stage before a third reading takes place on 19 April.
It was introduced by Julie Elliott, Labour MP for Sunderland Central, to level the playing field between building societies and banks to allow them to lend to more first-time buyers and homeowners.
Building societies accounted for around a quarter of all new mortgage lending in the UK and are especially useful for first-time buyers. In the first nine months of 2023, more than half of building society lending went to first-time buyers, supporting over 70,300 households.
Under the current act, building societies owned by members need to raise at least half of their funding from members’ savings deposits.
The funding limit helps preserve their mutual status but other types of funding, like those from financial markets can also count toward that limit, which “constrains building societies from competing more effectively with the UK banks”.
The BSA said that amending the current act would give building societies “more capacity to lend to UK customers, and to access emergency funding from the Bank of England in a time of financial stress, without it impacting their funding limits”.
“This will help to ensure building societies continue to operate safely and securely while also enabling them to help more people to get on the housing ladder,” the trade body added.
Important step for Building Societies Act
Robin Fieth (pictured), BSA’s chief executive, said: “This second reading is an important step for a bill that will help level the playing field for the UK’s building societies and give them the capacity to lend more into the economy.
“It’s high time the 1986 Act was updated to reflect the needs of today’s economy. If successful, the bill will drive greater competition in the mortgage market, which will give mortgage customers more choice, and support a healthy marketplace.”
Andrew Craddock, Darlington Building Society CEO, added: “Darlington Building Society supports the proposed reforms to the Building Societies Act. The modernisation will cut archaic red tape by removing outdated corporate governance requirements, which building societies face but banks don’t.
“Crucially, as the building society sector directs a greater proportion of lending to first-time buyers than banks, the proposed funding limit amendments will benefit more people looking to get onto the housing ladder.
“By enabling societies to provide additional mortgage lending, more hard-working people in the North East and across the UK can benefit. Amendments will also support societies to weather future periods of financial stress and help minimise risk in the banking sector.”
Julie Elliott MP said: “Building societies were founded to help working people own a home of their own and are an essential part of our communities – expanding home ownership, particularly to first-time buyers.
“I’m proud to be taking forward my bill and strongly welcome the cross-party support I’ve had so far. This is a real opportunity to help more people get on the housing ladder and realise their ambition of owning their own home.”
