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Definition: building society from Philip's Encyclopedia

In the UK, financial institution primarily for providing mortgage loans to house-buyers. The money lent by a building society comes from savings invested by the public in deposits and shares. Since the Building Societies Act (1986), they have been allowed to offer a wider range of financial services, putting them in competition with banks.

Summary Article: building society
From Collins Dictionary of Economics

a financial institution that offers a variety of savings accounts to attract deposits, mainly from the general public, and which specializes in the provision of long-term MORTGAGE loans used to purchase property. In recent years, many of the larger UK building societies have moved into the estate agency business. Additionally, they have entered into arrangements with other financial institutions that have enabled them to provide their depositors with limited banking facilities (the use of cheque books and credit cards, for instance) and other financial services, a development that has been given added impetus by the BUILDING SOCIETIES ACT 1986.

Most notably, major building societies, such as the Abbey National and Halifax, have taken advantage of changes introduced by the BUILDING SOCIETIES ACT 1986 and the FINANCIAL SERVICES ACT 1986 and have converted themselves into public JOINT-STOCK COMPANIES, setting themselves up as ‘financial supermarkets’ offering customers a banking service and a wide range of personal financial products, including insurance, personal pensions, unit trusts, individual savings accounts (ISAs), etc. This development has introduced a powerful new competitive impetus into the financial services industry, breaking down traditional ‘demarcation’ boundaries in respect of ‘who does what’, allowing former building societies to ‘cross-sell’ these services and products in competition with traditional providers such as the COMMERCIAL BANKS, INSURANCE COMPANIES, UNIT TRUSTS, etc.

Building society deposits constitute an important source of liquidity in the economy and count as ‘broad money’ in the specification of the MONEY SUPPLY. See FINANCIAL SYSTEM.

© C. Pass, B. Lowes, L. Davies 2005

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