Mike Fotis

Building societies are feeling the squeeze – but don’t discount these underdogs just yet

Barely a month goes by without a new banking firm popping up. And while some are interesting, and a few perhaps revolutionary, most have simply rolled out mortgage and savings products in an attempt to muscle in on the home turf of the UK’s building societies. Add to the mix a fast deteriorating High Street environment, and there’s little doubt that building societies are starting to feel the squeeze.

But far from being cowed, the mutual sector is gearing up to take on the new kids on the block, in a battle that cuts to the heart of what our society in 2018 really stands for.

Since the birth of building societies, their bread and butter has been the margin between deposits and mortgage lending, which is ‘a challenge in this low interest rate environment’ according to David Lownds, Head of Marketing & Business Development at Hanley Economic Building Society. New banks, with leaner operating models, have also squeezed this margin.

Aside from tighter margins, the mutual sector has other pressing challenges. ‘Without doubt the biggest challenge we face is the increasing cost associated with meeting ever more stringent regulatory requirements which can be disproportionate for a lender of our size. Because we lend carefully we came through the banking crisis unscathed, however the consequences of some reckless lending by others are impacting on us as the regulator raises the bar to prevent a recurrence,’ says Ian Keeling, Director of Sales and Marketing at the Vernon Building Society based in Stockport. David Lownds of The Hanley adds, ‘attracting new younger customers whilst ensuring our existing customer base remains well served is a key challenge.’

So how do building societies plan to stand out and stay relevant in an increasingly competitive environment?

‘We provide something that many banks are failing to – a personal and individual service.

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