A building society is a mutual institution owned by its investors and borrowers. It provides a selection of savings products and mortgages. The similarity of the product range between a building society and a bank means some people are unaware of the differences between them. Some may assume the only difference is in the name.
However, the clue to how different they are is in the description above – mutual institution. A bank is a business. If you were to invest in that business by purchasing shares, you would benefit by receiving dividends. Being an account holder at a bank does not entitle you to shares.
However, a building society is owned by its members and is not a business. If you open an account to save money with a building society, you become a member of that society.
Are you better off seeking a home loan from a building society?
As always, our advice is to evaluate different deals to see which ones are best. Different mortgages last for different lengths of time. Some have fees involved. Some have more competitive rates than others. Comparisons are the most important feature of sourcing the right mortgage for you.
However, building societies do tend to have preferential rates for savers, and there is a chance that borrowers might benefit from better rates too. One thing to be aware of is that building societies are often located in specific areas, i.e. Coventry Building Society and Yorkshire Building Society. However, that does not mean you must be based in that area to use their services – especially with internet access.
Therefore, considering a potential home advance from a building society located elsewhere in the country opens the way to other deals you may not otherwise have found.