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Of mutuals and Mansion House: underwriting of building societies can be "sheer brilliance"

ended 07. January 2025

At her Mansion House speech in November, the Chancellor, Rachel Reeves, said Labour were planning to support the mutual sector by launching a call for evidence on the credit union ‘common bond’ and asking regulators to report on the mutuals landscape.

She also welcomed the work of Nationwide, Co-operative Group, Arla and Royal London to establish an industry-led Mutuals Council to drive growth in the sector. Against this backdrop, Newspage asked brokers and professional property investors the following questions about where mutuals add value and the areas in which they could improve. Their views are below.

10 responses from the Newspage community

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Simon Bridgland
Broker at Charwin Private Clients
Considered by some as a national treasure, many building societies have members loyal to their last breath. Most borrowers don't know the flexibility they have in their underwriting, which can be sheer brilliance. I’ve had cases go through which wouldn’t stand a chance with a larger bank. The underwriting in a smaller society can take a good look at a client in a way that a larger bank wouldn’t consider with automated underwriting. Where some societies let themselves down is the application processes, some are literally pre-historic, especially for existing borrowers. Manual forms with wet signatures, authority letters, its just painful. It’s enough to make you declare to never use a lender again. Borrowers don’t tend to request a particular lender, if they did, it becomes a case of putting them on the right path. Societies could really stand tall if they had better tech for brokers to apply for new and existing borrowers. They need to drag themselves out of the 1980s and resonate.
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Tim Bowen
CEO at Mutual Vision
It's encouraging to see so many positive comments about building societies from brokers. Their ability to apply a personalised and more manual approach to underwriting is clearly seen as a differentiator. If they can level up their marketing and tech in 2025 then there is a real opportunity to grow market share. Significant growth in market share equates to an increased ability to not just provide more people routes into homeownership but, just as importantly, the ability to further support the communities that they serve locally. Mutuals have the history but now they must focus on building for their futures. The foundations, based on this evidence, are clearly there.
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Darryl Dhoffer
Founder at The Mortgage Geezer
Building societies, unlike banks, are owned by us, the customers. This means they're more focused on helping us get a mortgage, even with tricky situations like self-employment, past credit hiccups or weird houses. They often have more flexible rules, understand our unique situations better, and even care about our communities. Plus, they're usually more upfront about what we need to do. Many building societies also use manual underwriting, meaning a real person looks at your application, instead of a computer automatically saying no. This human touch can be a big help when you have a complex situation.
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Kundan Bhaduri
Entrepreneur, Investor and Landlord at The Kushman Group
Building societies often shine where larger high street banks fall short, particularly when it comes to personalised service and flexibility. Unlike big banks, their underwriting processes tend to be more manual, allowing for greater consideration of an individual's situation rather than relying solely on hard algorithms. This often makes them a go-to for complex cases or self-employed clients. However, there’s room for improvement. Many smaller societies lag behind in branding and tech. A stronger digital presence and streamlined online tools could boost their appeal, especially with younger borrowers. Clients typically view building societies as approachable and community-driven, though awareness of smaller societies remains limited. Local interest tends to hinge on the best rates rather than loyalty to a particular society. Highlighting their unique benefits more effectively through PR could make a real difference.
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Michelle Lawson
Director at Lawson Financial
Building Societies tend to offer a more flexible approach than the banks as they are owned as such by their customers. This gives them more autonomy to help where the big banks can't. You often find them assisting with riskier situations like adverse credit, unique properties and more. The only thing that can let them down is their staffing levels as they often take longer to process as they adopt a more manual underwriting service and avoid the 'computer says no' approach.
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Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
Building societies play a crucial role in the UK lending market by offering flexibility and a personalised approach that larger high street banks often cannot match. Their manual underwriting processes and willingness to consider complex cases — such as self-employed borrowers or those with unique financial circumstances — set them apart. This diversity in approach ensures that more people have access to tailored mortgage solutions, providing options where others might see barriers. Building societies are an invaluable part of the financial landscape, balancing community focus with innovative lending.
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Ben Perks
Managing Director at Orchard Financial Advisers
In these leaner times it is the Building Societies that are the unsung heroes in the reliant mortgage market. They have lived off the high street scraps in years gone by, but now their attitude to lending and differing approaches have become a necessity. Borrowers are more complex now than they have ever been and it is the quirkier lenders, many of which are building societies, that have forced the Big 6 to think outside the box.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
In mortgage lending, building societies are mainly fringe players who offer some criteria flexibility but often with tighter affordability. Service usually is more manual and slow as they don’t have the large systems and teams of the larger big banks. The concept of building societies to most sounds as outdated as the endowment and 25 year mortgage terms.
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Dariusz Karpowicz
Director at Albion Financial Advice
Building societies might be the underdogs of British banking, but they're proving to be quite the superheroes for those who don't fit into the neat little boxes that big banks love so much. While the high street giants are busy playing with their algorithms and automated systems, these plucky societies are rolling up their sleeves and actually looking at mortgage applications with human eyes and understanding hearts.
In a world where everyone's financial situation seems to be getting more complex by the day, building societies have evolved from being just the friendly faces on the high street to becoming the go-to problem solvers for the self-employed, the credit-history challenged, and anyone with a slightly unusual property dream. Sure, they might still be wrestling with some rather vintage paperwork systems, but their willingness to consider the person behind the application rather than just the numbers makes them invaluable in today's mortgage market.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
Building Societies make up an essential element in the fabric of the UK mortgage landscape. Nationwide aside, most are small in relation to the big six banks and so cannot use the same funding or economies of scale that the likes of Lloyds and Santander can. So, they must approach the market differently and look at the areas where the big banks tend not to play, carving out specialisms and niches in key markets, such as limited company directors, or self-builders, for example. This approach means rate becomes less of the focus and they can lean into the underwriting talent that they process; giving them an advantage over the computer driven underwriting of the bigger lenders and allowing them to help people who otherwise would struggle. They are however a remarkably diverse group of businesses and what one Society may see as good lending, another may turn away, so having a broker who knows the quirks and benefits of the various Building Societies is essential for a borrower.