Mutual Building Societies

Although many mutual building societies do not really class as specialist ethical buildings societies they are popular with ethical investors for a number of reasons. Mutuals, as a general group of financial service providers, by their very nature do not invest in anything other than people’s mortgages and their own core services.

Because they do not have business accounts they cannot do much damage from the point of view of ethical investing, because they do not invest in multinationals or anything potentially unethical.

The extra good news is that they often offer the best rates of interest to customers, perhaps because they do not have to pay off shareholders. They also have a reputation of being well run. Some well known building societies such as the Abbey National are no longer mutual.

For a full list of mutual building societies contact the Building Society Association.

What Are Mutuals?

A mutual is based on the principle of mutuality. Unlike a true co-operative, members usually do not contribute to the capital of the company by direct investment, but derive their right to profits and votes through their customer relationship.

A mutual exists with the purpose of raising funds from its membership or customers (collectively called its members), which can then be used to provide common services to all members of the organisation or society. A mutual is therefore owned by, and run for the benefit of, its members – it has no external shareholders to pay in the form of dividends, and as such does not usually seek to maximize and make large profits.

Building societies in their original form are mutual organisation that emerged in the UK in the 19th century, for personal savings and home mortgages. For much of the 20th Century, building societies had a large share of the retail savings market but faced changes after deregulation under the Building Societies Act 1986.

Then many of the larger societies converted into joint stock banking companies, some of which were subsequently acquired by other banks.

Savings Balances Increase At Mutuals

Mutuals have had a beneficial impact on many towns and cities across the UK, commanding a great degree of loyalty from customers. Because they focus on service not just profit.

Mutuals are a huge part of the UK economy, employing over 800,000 people, with membership equivalent to one in three people in the UK, revenue of £84bn, and assets of £477bn.

Increasing Popularity of Mutual Building Societies

From 1 March 2010, in relation to savings data for the month of January 2010 onwards, the Bank of England combined figures for building societies and mutually owned banks. This new data is reported as the mutual sector.

As of early 2010 Balances held in savings accounts at mutual institutions increased by £807 million in February compared to reduction in balances of £467 million in January. After interest credited to accounts is excluded, mutuals had a net receipt of £623 million February.

In the housing market, mutuals approved £1,389 million worth of loans in February, compared to £832 million in January, a 67 per cent increase. Gross lending was £1,174 million in February, a 13 per cent increase on the £1,039 million in January.

Mutual statistics February 2010

• Mutuals’ gross lending amounted to £1,174 million in February 2010 compared to £1,039 million in January.
• Net lending by mutuals in February 2010 was – £830 million compared to – £819 million in January.
• Approvals by mutuals in February 2010 were £1,389 million compared to £832 million in January.
• Mutuals had a net receipt of £623 million in February 2010 compared to a net withdrawal of £741 million in January.
• Mutuals had a net withdrawal of £109 million from cash ISAs in February 2010 compared to a net withdrawal of £180 million in January

Mutuals and Other Ethical Member Owned Organisations

Links between Mutual organisations in the financial services sector including building societies, mutual insurers, foundation trusts and co-operatives as well as member run organisations from across the health, education and retail sectors are increasing. In 2008 there was a first national event to bring together this ethical family of mutuals and member run organisations, all for organisations owned by members and not shareholders.