Building societies are financial institutions with a unique, customer-owned structure. Unlike traditional banks driven by investor profits, building societies prioritise their members and the communities they serve.
This mutual model, where customers pool their savings to help each other buy homes, has a rich history spanning over two centuries. Although most of them have today reclassified as mutual banks in Australia, the people-first ethos remains.
Origins in the UK
Building societies originated in the late 18th century in the UK as cooperative financial institutions aimed at helping working-class individuals buy a home.
The first known building society, the Ketley’s Building Society, was established in 1775 in Birmingham, England, by a landlord who created a mutual savings scheme where members pooled their funds to finance home construction.
Initially, these were terminating societies, meaning they dissolved once all members had built or purchased homes. By the mid-19th century, “permanent societies” evolved, offering continuous membership and a broader range of financial services.
The movement grew rapidly, and today, the UK still has a significant number of active building societies, with Nationwide Building Society being the largest globally. They remain vital to the UK’s financial sector, often serving local communities and offering competitive rates.
Building societies in Australia
Australia’s building societies followed a similar trajectory, beginning in the mid-1800s. They played a crucial role in providing home loans, particularly after World War II, offering an alternative to traditional banks.
By the 1970s, they were key players in the Australian mortgage market. While most building societies have since reclassified as mutual banks, their legacy continues to influence Australia’s financial sector.
The mutual difference
The defining characteristic of building societies (and mutual banks and credit unions) is their customer ownership. This structure means decisions are made to benefit members and their communities, rather than external investors. This allows customer-owned banks to offer members competitive rates, excellent service, and contribute significantly to the communities they serve.
It’s a model rooted in the idea of people helping people, and this people-first ethos continues to drive customer-owned banks today.
To find a customer-owned bank that aligns with your needs, visit findabank.com.au