What does the future hold for Building Societies?

With the furore over the Dunfermline Building Society having being forced into a hasty union with the mighty Nationwide this week you'd be forgiven for thinking that the writing's on the wall for building societies in general.

For a movement that's been going since 1775, and had over 2750 societies in the 1860s it looks like it's downhill all the way to find that in 2008 numbers had dwindled to 53. However, you've got to put that in context, because in 1910 there were only about 600,000 investors, compared with over 23million now - hardly the sign of something that's dying out.

If building societies were going to disappear it would have happened in 1997 when household names such as Halifax, Woolwich, Northern Rock, and Alliance and Leicester all became banks. Instead a strange thing happened; all the key numbers, such as the number of investors, borrowers, and the amounts borrowed have climbed steadily since then, with the amount lent in each year tripling.

In contrast to the building societies that converted themselves into banks - where, with the exception of Abbey, they've all fallen on hard times - the largest building society, Nationwide, has been around since 1848 and now has assets of over £180Bn.

One of the important things that sets building societies apart from banks is that they are owned by the people who save with them, they're often known as "mutuals" and they work like a cooperative. That means they keep any profits in the society and don't have to distribute them to shareholders. It also means that their bosses aren't on elaborate share incentive schemes, and while they get paid quite well they simply aren't in the same league as bankers - something that you might find reassuring in present times!

Running a savings and mortgages company for shareholders is reckoned to add about 35% to operating costs, so you should find that building societies are a good way of saving money and compare well with banks for both borrowers and savers.

Building societies tend to have a local presence and are often active in their communities and take part in campaigns which help educate people on how to save and give useful savings tips.

We think that, just like credit unions, building societies are set to carry on playing a key role in society - they're certainly worth looking into whether you're a saver or borrower_.

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