The law change allows building societies to compete equally with banks
The Building Societies Act 1986 Amendment Bill successfully passed its legislative stages on Friday, becoming one of the final bills to clear Parliament.
Introduced by Julie Elliott, Labour MP for Sunderland Central, the new Act aims to put building societies on equal footing with their banking competitors, facilitating increased lending to first-time buyers and homeowners.
The old legislation requires building societies to raise at least 50% of their funding from members’ savings deposits. This funding limit preserves their mutual status but also includes other types of funding, such as financial market sources and Bank of England loans. This constraint, however, limits their ability to compete with banks.
The amendment will allow building societies to lend more to UK customers and access emergency funding from the Bank of England during financial stress without affecting their funding limits. This change aims to ensure building societies can operate safely while helping more people get on the housing ladder.
Delighted to see the BS Act 1986 (Amendment) Bill pass its legislative stages. Thank you @JulieElliottMP, @LordRoyKennedy and @BimAfolami for all of your support. It will help building societies compete equally with banks and support more lending to FTBs https://t.co/BDTwS1MAZs pic.twitter.com/I75RjDYoOk
— Building Societies Association (@BSABuildingSocs) May 24, 2024
Building societies contribute to a quarter of all new mortgage lending while focusing more on first-time buyers than banks. Around 55% of their lending in the first nine months of 2023 supported first-time buyers, aiding over 70,300 households in purchasing their first homes.
“The fact that this bill has been able to successfully complete the necessary Parliamentary stages as part of wash up is testament to the strong cross-party support for building societies and the important role they play in our communities,” said Robin Fieth (pictured), chief executive of the Building Societies Association.
“The new act 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. The changes brought in by this new Act will drive greater competition in the mortgage market, which will give mortgage customers more choice, and support a healthy marketplace.”
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, X (formerly Twitter), and LinkedIn.
