The Building Societies Act 1986 (Amendment Bill) is poised for its second reading in the House of Commons tomorrow.
Introduced in December by Julie Elliott MP (Lab, Sunderland Central), the Bill aims to modernise existing legislation, placing building societies on equal footing with banks and enhancing their ability to support first-time buyers and homeowners.
Building societies are pivotal in the UK economy, contributing a quarter of all new mortgage lending. They have been particularly instrumental in supporting first-time buyers, with over 70,300 households helped in purchasing their first home in the first nine months of 2023.
The current Act mandates building societies to raise at least 50% of their funding from member savings deposits, a rule that upholds their mutual status. However, this ‘funding limit’ also includes financial market funding and Bank of England loans, limiting their competitive edge against banks.
The proposed amendments aim to expand building societies’ lending capacity and allow them to access emergency funding from the Bank of England without affecting their funding limits. This change is expected to secure their operations while enabling more people to access housing.
Robin Fieth, BSA chief executive, said: “This second reading is an important step for a Bill that will help level the playing field for the UK’s building societies and give them the capacity to lend more into the economy.
“It’s high time the 1986 Act was updated to reflect the needs of today’s economy. If successful, the Bill will drive greater competition in the mortgage market, which will give mortgage customers more choice, and support a healthy marketplace.”
Andrew Craddock, CEO of Darlington Building Society, also voiced support, stating: “Darlington Building Society supports the proposed reforms to the Building Societies Act. The modernisation will cut archaic red tape by removing outdated corporate governance requirements, which building societies face but banks don’t.”
Julie Elliott MP added: “Building societies were founded to help working people own a home of their own and are an essential part of our communities. I’m proud to be taking forward my Bill and strongly welcome the cross-party support I’ve had so far. This is a real opportunity to help more people get on the housing ladder and realise their ambition of owning their own home.”
The Bill will undergo committee and report stages, with its third reading scheduled for Friday, 19th April, marking a significant potential shift in the UK mortgage landscape.
