by Mark Johnston
Building Societies Lock Out Non-Locals.
It appears that building societies are now beginning to play a big role in the future of British banking, this is due in part to heightened interest in the mutals because of the banking scandals of last summer.
Recent reports also show that banks no longer have to compete for savers money because they can get cheap finance from the governments under the funding for lending scheme, this has cause smaller building societies to become ‘swamped’ with interest.
Many of the smallest building societies have always funded lending from deposits so they have not had to use the funding for lending scheme, this has meant that their savings rates have not fallen and therefore they have found themselves far higher in best buy savings tables.
Building societies on the whole pride themselves on their strong links within their local communities.
This therefore has now sparked reports that suggest that building societies are ‘keeping it local’ by increasingly offering their best deals to those who can get to their branches or who live a specified distance away.
According to Moneyfacts, a financial advice group, almost a fifth of 47 building societies are now only open to local residents.
Ipswich building society, Vernon building society, Dudley building society, Loughborough building society and Tipton & Coseley building society, have all now reverted to ‘locals only’ providers since mid November last year. This is a strategy that most building societies left behind in the 1990s.
The Building Societies Assocation (BSA) believes that this particular move to revert back to being ‘local’ or ‘regional’ only providers represents a necessary and forward thinking decision from the sector, one that allows them to service their heartlands well, delivering both value and good service.
Sylvia Waycot, from Moneyfacts, states “the small building society market now appears to be closing its doors to wider custom and reverting to its roots of supporting local communities by providing savings and mortgages to specific postcodes or number of miles from a branch or even insisting that business is only carried out in branch”.
Some experts feel that many of the smaller building societies are unable to cope with an influx in customers due to a lack of infrastructure and they may also simply want to keep their operations small.
Even those building societies that are open to those throughout the country are increasingly offering competitive ‘branch only’ accounts, this can effectively close these deals to those customers who live further away.
Brian Morris, head of savings policy at the Building Societies Association (BSA), said “whilst the diversity of the sector means that many operate on a national level, some do choose to focus on their heartlands, yet offer wider services over the internet and telephone”.
In conclusion, while all this may be good news for locals, at a national level it does add a layer of frustration, especially as many consumers seem to now have more trust in building societies even though their money is just as safe in
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