Building Society in Banking 2025: Definition, Benefits, and Top UK Examples with Prices

Julia Kagan, a renowned financial journalist and former senior editor at Investopedia, explains the essence of building societies.

What Is a Building Society?

A building society is a member-owned financial institution primarily operating in the UK, Ireland, Australia, New Zealand, and other Commonwealth nations. Unlike typical banks, building societies are owned entirely by their members, not shareholders, making them similar to credit unions in the U.S. They focus on providing mortgages, savings accounts, and other banking services tailored to their members' needs.

Key Highlights

• Building societies offer banking and financial services exclusively to their members.
• Members are often connected to construction, real estate, or cooperative housing sectors.
• They adopt a conservative approach to investments compared to conventional banks.

How Building Societies Work

Building societies emphasize savings and mortgage lending, enabling members to finance large property purchases through manageable repayments over time. Unlike banks listed on stock exchanges, building societies empower each member with voting rights, ensuring democratic control and prioritizing member benefits.

In the UK, the Building Societies Association represents 43 societies and 7 credit unions, collectively serving over 26 million customers as of 2024.

Important Note

Building societies are often referred to as mutuals due to their member-owned structure.

Unique Features of UK Building Societies

UK building societies are restricted from raising more than 50% of their funds from wholesale markets, unlike banks that have broader funding options. This limitation fosters a more stable, member-focused financial environment but can also constrain growth compared to banks.

Some building societies faced challenges during past financial crises, leading to mergers or acquisitions, such as Barnsley, Derbyshire, and Dunfermline societies being absorbed by larger ones like Nationwide.

Historical Background

Building societies date back to the 18th century, starting as temporary 'terminating societies' designed to help members acquire homes. The first permanent society, Metropolitan Equitable, was established in 1845. By 1910, over 1,700 societies existed, prompting the creation of protective organizations and legislation like the 1986 Building Societies Act, which expanded their services.

Building Societies vs. Credit Unions

While both are member-owned, building societies typically serve broader communities and offer a wider range of financial products. Credit unions may be smaller and more localized but operate on a similar cooperative principle. Both prioritize member benefits over profits, contrasting with traditional banks.

Top Building Societies in the UK (2024)

Building societies compete on interest rates, service quality, and accessibility. The largest by assets in 2024 include:

• Nationwide: £272.35 billion
• Coventry: £58.87 billion
• Yorkshire: £58.75 billion
• Skipton: £33.57 billion
• Leeds: £25.51 billion

How Many Building Societies Are There in the UK?

There are currently 43 building societies operating in the UK, supported by the Building Societies Association, which also represents 7 national credit unions. Together, they serve approximately 26 million members.

Differences Between Building Societies and Banks

Unlike banks, building societies are not publicly traded and are owned by their members, giving each member voting rights. While both offer similar financial products like loans, mortgages, and savings accounts, building societies focus more on member benefits and conservative financial management.

Largest Building Society Worldwide

Nationwide stands as the world's largest building society, with assets totaling £269.07 billion at the close of the 2022 fiscal year.

Conclusion

While banks dominate the financial sector, building societies offer a unique, member-centric alternative that prioritizes community and stability. Particularly in the UK and Commonwealth countries, they continue to be a trusted choice for savings, mortgages, and other financial services, echoing the cooperative spirit of credit unions in the United States.

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