Building societies are financial institutions that offer banking and other financial services, but are owned by the members of the society. Most commonly identified with nations such as the United Kingdom and Australia, a building society is considered to be the equivalent of a savings and loan association in the United States. There are several benefits offered by this type of institution that makes the society very attractive to a number of consumers.
One of the more beneficial aspects of the building society is that unlike banks and other types of financial institutions, there are no shareholders. This means there are no dividends that must be paid to holders of stock in the society. Since the members own the society, the profits generated are retained within the structure of the institution, and are readily available to members for such important transactions as mortgages and saving for retirement.
Another attractive element of the building society is that it focuses primarily on mortgages and savings accounts. While other financial services are offered by different building societies, efforts to offer the best possible interest rates on different savings accounts, as well as provide the most competitive rates for fixed and variable rate mortgages, are of special interest. This attention to core functions often allows the societies to be forerunners in anticipating market trends and using those predictions to best advantage before banks and others have the opportunity to do so.
People often choose to become members of a building society because the chances of obtaining a mortgage are often much better than with banks and finance companies. In economic times when banks may be unwilling to write mortgages for anyone who does not have impeccable credit, a building society will be more likely to look closely at the individual’s circumstances and seek to work with the potential homebuyer. While building societies do not offer their members guaranteed approval for mortgages, they do represent a more likely avenue of financing for many people.
While a building society is not a bank, that does not mean the institution is unregulated. In countries where societies are established, there is usually some type of regulatory council that ensures that each building society operating within the nation’s borders complies with basic financial standards and laws. Failure to do so can lead to heavy fines, and possible suspension of the right to do business within that country. In the United Kingdom, the Building Societies Commission is one of the organizations that oversees the operation of building societies within that nation.