Guest blog: How growing the mutual sector can contribute to growing the economy

By Tom Simpson, interim chief commercial officer, Yorkshire Building Society.

Two key pledges from the Government are to grow the economy and to grow the mutual sector.

Mutuals like Yorkshire Building Society might say the two go hand in hand - or that they're mutually beneficial.

The Chancellor's Mansion House speech last week recognised "the invaluable role of the mutual and co-operative sector in driving inclusive growth across the UK" and promised a package to "help unlock the full potential of the sector."

One of the ways mutuals help drive economic growth is by lending, especially to first-time buyers.

It's essential to a well-functioning housing market, and the health of the market is inextricably intertwined with that of the UK economy.

You can argue it has been lending by building societies, not banks, that enabled a housing market recovery after the slowdown caused by interest rate rises following the mini-budget in September 2022.

In 2023, only building societies grew their mortgage balances, and this continued into 2024. In the six months to March 2024, building societies' mortgage balances grew by £8.6 billion, while balances at other lenders fell by £10 billion¹.

Yorkshire Building Society provided 44,000 residential mortgages in 2023, and another 23,000 in the first six months of 2024. In the first half of this year, we lent £5.2 billion - £1 billion more than the same period last year.

Building societies have a record of helping first-time buyers get on the property ladder. Mutuals provided 37 per cent of lending to this market in the six months to March 2024².

Without first-time buyers, often the target market for new builds, construction projects are less likely to get off the ground, and we're already not building enough homes.

For those who decide they want to buy, going on to raise a deposit is a big challenge. Our research last year found that first-time buyers expect to need an average deposit of £32,000 and four in ten will need family help, with a typical contribution being around £18,000.

But not all can turn to the 'bank of mum and dad' for a deposit.

Yorkshire Building Society provides more mortgages with a high loan-to-value ratio, and our £5k Deposit Mortgage means people can borrow up to 99%.

Lending does not just provide a boost to the economy. Individual wealth and wellbeing are also improved by being able to buy a home.

Recent analysis by Yorkshire Building Society showed homebuyers could be £2.6 million better off over their lifetime than those who rent³.

If someone used our £5k Deposit Mortgage to buy a typical £200,000 first home, and paid it off over 30 years, they could turn that £5,000 deposit into a nest egg worth £1.7m⁴.

In contrast, people who rent in retirement could need £391,000 more in savings than those who have paid off their mortgage⁵, and more retired renters may mean the Government facing a higher housing benefit bill.

On top of a possible pension shortfall, because people are not putting away enough for their retirement, this should worry those in Westminster.

Building societies are committed to supporting aspiring homebuyers and the economy through lending. We're committed to helping those typically underserved by the mortgage market or struggling with affordability or raising a deposit.

We can do this because we're member-owned, with no external shareholders. Our profits are given back to members and their communities or reinvested in our business.

We're already big contributors to the economy. The mutual and co-operative sector has combined annual revenues of £165.7 billion, 3.5% of GDP.

Mutuals benefit individuals, communities, society and the country - and so if we grow, those things benefit even more.

We want to be able to do more. We want a level playing field so we can compete fairly with others in the financial sector and meet the needs of our communities. We want a Minister for Mutuals and to be at the heart of the Government's thinking.

We want the Government to create policies that promote a healthy housing market and work with other lenders and builders to make homes more affordable, more available and more sustainable.

You can find out more about Yorkshire Building Society here

¹ Building societies continue to provide all the growth in mortgage market (bsa.org.uk)

² Building Societies Trading Update

³ Mind the wealth gap - A generation missing out on millions? | YBS

⁴ Assuming future house price growth of 4% and based on a 55-year period. Using average first-time buyer age of 33 (money.co.uk) and maximum life expectancy of 88 for someone aged 33 now (ONS)

⁵ The cost of renting in retirement: £391k | Standard Life

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