Everything you wanted to know
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Building societies are financial institutions based in the United Kingdom and several other countries. They are mutual organisations owned by its members that offer banking, mortgage lending and other financial services. Since building societies are mutual organisations, people who have a savings account with a building society are members and they will have rights to vote on matters within the society, receive information and be able to attend meetings.
Building societies are not banks. Banks are companies normally listed on the stock market - they are owned by their shareholders. Building societies on the other hand are mutual organisations that are not driven by shareholder pressure to maximise profits to pay away as dividends therefore building societies are able to offer better rates of interest on savings and offer cheaper mortgages than their competitors. The other major difference between building societies and banks is that there is a limit on the proportion of their funds that building societies can raise from the wholesale money markets. It is illegal for a building society to raise more than 50%of its funds from the wholesale markets. The average proportion of funds raised by building societies from the wholesale markets is 30%.
The beginning of the building society can be traced back to the First Industrial Revolution in the 18th Century. For a while building societies were simply set up by local organisations. Members would pool funds for building houses and purchasing land, therefore the building societies were usually closed down once every member of the organisation had been housed and had purchased the land they wanted.
However, eventually, building societies started being used by members depositing their money as investment, without any desire to borrow to buy a home. With this, building societies no longer were closed down, or "terminated". Building societies from then on became more permanent as we know them today.more »