A private members’ bill has been introduced by Labour MP Julie Elliott to modernise the law on building societies.
The bill, which has its second reading on 19 January, would allow the UK’s building societies to remove certain types of wholesale funding from counting against their funding limits.
Elliott, MP for Sunderland Central, says this will would “level the playing field between banks and building societies, allowing building societies to support more first-time buyers to buy their own home”.
The proposed changes won’t alter the funding limit but will remove several key impediments, in the hope of enabling building societies to lend more and ensure more mortgage loans are available to UK homebuyers at competitive rates – helping first-time buyers as well as those further up the housing ladder.
“Building societies were founded to help working people own a home of their own,” said Elliott, “and they direct a greater proportion of their lending to first-time buyers than banks do – but they are constrained by archaic legislation, unfit for today’s economy.”
The bill has been subject to significant consultation in recent years and has broad support from across the building societies and mutuals sector, as well as backing from both sides of the Commons.
The Building Societies Association (BSA) said: “A small but important piece of legislation means the competitive playing field in banking is not as level as it could or should be.
“Under the Building Societies Act 1986, building societies are subject to ‘funding limits’ that their high street banking competitors are not. These limits require at least half of their funding to come from savings deposits made by individuals and businesses. This limits the abilities of societies to lend more to first-time buyers, business owners, and individuals throughout the UK and fetters competition in the banking sector.”
BSA CEO Robin Fieth added: “I would like to thank Julie Elliott MP for bringing forward this important piece of legislation to help to level the playing field between building societies and banks.
“Building societies provide a vital service to the communities they serve but are currently prevented from doing more by archaic legislation. The changes proposed in this Bill will help societies to help more people buy a new home and save for the future.”
