At a glance
Building societies are owned and run by members, while banks are owned by shareholders.
Building societies can sometimes offer more competitive interest rates on savings.
First-time buyers and the self-employed may find it easier to get a mortgage from a building society.
Some building society mortgages are only available in certain areas.
What is a building society?
Building societies offer many of the same products and services as banks, with a focus on savings, mortgages and loans.
However, building societies aren’t just there to turn a profit – they’re there to help people achieve their life goals. The money building societies make is reinvested in the business, allowing them to offer more loans and better interest rates.
Did you know?
Many homeowners have clambered onto the housing ladder thanks to building societies. In the six months up to March 2025, building societies accounted for 29% of all UK mortgage loans. Of those, 61,400 were first-time buyer mortgages.
Banks vs building societies. What’s the difference?
The main difference between a bank and a building society is that building societies are mutual. This means they’re owned and run by their members – the people who bank, save and borrow with them.
Banks, meanwhile, tend to be floated on the stock market, so are owned by shareholders.
Pros and cons of building societies
What are the advantages of building societies?
They’re more likely to lend to ‘riskier’ borrowers – building societies often lend to people that major banks consider high risk. For instance, if you’re older, self-employed or taking on a self-build project, you might find that a building society is more willing to give you a loan. If you’re taking out a mortgage, a building society may view you in a more generous light if you’re a first-time buyer, have a small deposit or work in the gig economy.
They could offer better interest rates – building societies don’t have to pay dividends to shareholders, so may offer better interest rates than banks. But it’s always worth shopping around so you can compare.
You’re a member, not a customer – as a building society member, you have a voice and a say in how the company is run. For example, you can vote on who takes certain roles in the organisation.
What are the disadvantages of building societies?
Banks tend to offer a larger range of products than building societies.
There are far fewer building societies than there used to be, giving you less choice.
Some building society mortgages may only be available in certain areas and some savings accounts at certain branches.
Not all building societies offer current accounts.
How many building societies are there in the UK?
According to the Building Societies Association (BSA), the UK has 42 building societies and seven credit unions. This is far fewer than there were in the building society’s heyday. Back in 1910, there were 1,723 building societies.
Many former building societies have become banks so are answerable to shareholders, rather than their members.
Who are the biggest building societies?
Nationwide is the largest building society in the world and the UK’s second-largest mortgage provider.
Other big names in the field include Coventry Building Society and Yorkshire Building Society. Both are committed to many worthwhile charitable ventures, such as ending youth homelessness and helping those in financial hardship.
A history of the building society
Back in the 18th century, only the wealthy had access to banking and financial services. Meanwhile, the working class had to struggle by in insecure and unsafe housing.
An idea for a mutual society was born, allowing ordinary people to borrow money they could use to buy land and build their own home.
The first building society was set up in Birmingham in 1775. Others soon followed. Nationwide – or as it was then known, the Southern Co-operative Permanent Building Society – was formed more than 100 years later, in 1884.
What’s the future of building societies?
Building societies are sometimes seen as old-fashioned. In recent years, with the emergence of digital banking and challenger banks, building societies have fallen behind.
However, with their expertise in savings and mortgages, and commitment to their members, building societies still serve an important purpose.
In fact, the mutual finance sector is now showing signs of growth. Over the past year, two shareholder banks were acquired by the two largest building societies and are now mutually owned banks.
According to the BSA, building societies and mutually owned banks remain a consistent driving force in the mortgage market while continuing to offer competitive savings rates.
What types of account do building societies offer?
Some building societies, like Yorkshire and Skipton, only offer savings accounts and ISAs. Others, like Nationwide and the Cumberland, offer current accounts as well as savings accounts and ISAs.
FAQs
How do building societies make money?
The interest rate building societies pay on savings is lower than the rate customers pay on their mortgages. This difference is the building societies’ profit.
How safe is my money in a building society?
The Financial Services Compensation Scheme (FSCS) covers banks, building societies and credit unions authorised by the Prudential Regulation Authority.
That means your savings up to £120,000 are protected if your financial service provider goes under.
What happens if a building society changes to a bank?
In the past, when building societies have become banks, they’ve given their members shares to either keep or sell. But there are potential downsides: for example, mortgages may become more expensive.
What’s a credit union?
A credit union is a community venture, where people who don’t meet the criteria for bank loans pool their money so they can lend to each other. Credit unions are run by and for their members. The interest they can charge on loans is capped at 3% a month.
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With over 10 years’ experience writing, editing and managing content, Emma has written and edited for some of Australia’s leading financial comparison brands, including Savings.com.au, Your Investment Property Magazine, and Your Mortgage.
Ele Clark is an award-winning editor who has held leadership roles at Which? and news-stand publications in London and Dubai. She’s appeared across the press and media, including BBC’s Panorama. With almost 20 years’ experience in personal finance, insurance and consumer journalism, she leads a talented team at Compare the Market, creating insightful, accessible content to help people make informed financial decisions.
Charlie is a senior commercial leader with close to a decade of experience across the UK’s leading personal-finance and comparison platforms. Before joining Compare the Market as Head of Commercial in 2024, he held senior commercial roles at TotallyMoney and MoneySuperMarket Group.
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