How to Choose a Building Society in the UK

If you are looking for a mortgage or want to supercharge your savings, you will likely be comparing different banks.

However, don’t stop there! Take some time to investigate the world of building societies, too.

In this blog, we are delving into the best UK building societies, how they work, their main benefits and how to select the right one for your money.

What Is a Building Society?

Building societies are financial institutions that provide savings accounts and mortgages.

Their members own them, so they operate like banks but don’t have external shareholders. This means a building society is not a commercial business, according to the traditional meaning of that phrase, since there is no aim to generate shareholder wealth.

In some cases, members even have the chance to vote on how the society is run. However, this might not be available with all UK building societies.

Banks vs Building Societies

Banks and building societies offer similar products, but as explained above, the main differences are in ownership and profit. Here are a few bullet point differences between the two.

Banks are owned by shareholders and building societies are owned by customers (often called members).
Building societies focus on savings and mortgages, while banks offer larger ranges of financial products.
Banks aim for shareholder profits, while building societies reinvest any profit for better customer experiences.
Both are regulated by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).

4 Main Building Society Benefits

The best building societies in the UK put their members first and offer an extensive range of benefits. Let’s break down the main ones to give clearer insights into borrowing from or saving with a building society.

Community Support

Alongside focusing on members rather than shareholders, building societies tend to reinvest in local communities or charity projects. This benefits the surrounding areas and wouldn’t be possible if the building society aimed to solely generate earnings for shareholders.

A More Ethical Approach to Finance

Some consider building societies to be a more ethical way to borrow because they are run for and by members.

They also tend to avoid ‘riskier’ investment banking seen in banks, which is an advantage to members who prioritise responsible practices – but of course, this comes down to personal opinion.

Better Interest Rates

On the whole, building societies provide higher savings rates and lower mortgage rates than banks can provide.

This is a slight generalisation, and actual rates will differ depending on which building society you bank with and the latest Bank of England interest rates.

Long-Term Growth

Building societies tend to have a more conservative, long-term approach to finance.

This allows you to access sustainable savings over multiple years, rather than short-term teaser rates that are often not guaranteed to go beyond a few months.