"Complex lending is what we do best, and standard sourcing systems don’t always showcase the best that we and societies like us can offer. This can lead to missed opportunities for networks, brokers, and their clients."
I recently attended an industry event where I spoke about the importance of building societies and why they should be at the forefront of every broker’s mind, particularly for clients who don’t quite fit the mould of some mainstream lenders’ criteria.
I believe in 2025 we’ll see brokers increasingly asking, ‘Who can help with their complex client needs?’ And in many cases, the answer might just be a building society.
Building societies are such an important part of the mortgage market, but they can at times be a bit misunderstood. While some mutuals have made a name for themselves in the first-time buyer space, for specialist lenders like the Dudley, first-time buyers aren’t the main focus.
Instead, complex lending is what we do best, and standard sourcing systems don’t always showcase the best that we and societies like us can offer. This can lead to missed opportunities for networks, brokers, and their clients.
When it comes to complex circumstances, our lending criteria aren’t always black and white. While like other lenders we have set criteria, we take a personal approach to each case, taking account of a wide range of circumstances.
If we think about the 1.8 million borrowers whose fixed rates will come to an end in 2025, some of them may have locked into a five-year fixed rate back in 2020 and since then seen a change in their borrowing needs. The pandemic changed a lot of things - some people switched careers, moved abroad or experienced major life changes.
It might’ve been years since a borrower last spoke to a mortgage broker and their financial situation may have become more complex. A client might need someone to take a proper look at their case, with the flexibility to adjust criteria to suit their individual needs. For some complex clients, an automated approach just won’t work.
The need for something different
So, what is it that specialist building societies can do?
Firstly, we may refer to ourselves as specialist building societies, but we are not specialist lenders in the traditional sense - like those typically associated with borrowers who have bad credit.
Instead, complex lending refers to anything that has an added layer of complexity. This could be a client needing to borrow on an interest-only basis into retirement, a self-employed borrower juggling multiple businesses, or a high-net-worth expat looking to buy property in the UK, such as a holiday let or buy-to-let.
What we offer might not be as scalable as some of the larger lenders, but we provide something distinctive that can make a real difference to brokers and their clients.
We expect to see increased demand in many areas that specialist building societies are known for in the coming year, such as lending into and during retirement, as well as expat mortgages, to name but a few. This is why it’s important networks and brokers keep building societies in their sights.
We see the demand for alternative solutions firsthand when our business development managers (BDMs) visit brokers - there’s a genuine interest in what we can do. Often, brokers come to us with complex cases they thought no one could help with, simply because they were looking in the wrong place.
Most brokers know what mainstream lenders offer, or can easily find it through sourcing systems, but may not be aware of what building societies can bring to the table.
Building societies lead the way
We’ve already seen the role of building societies grow and evolve in recent years and we expect this to continue into 2025.
If we look at the latest data from the Building Societies Association (BSA), its figures show that in the six months leading up to September 2024, building societies increased mortgage balances by nearly £12 billion - compared to less than £5 billion at all other lenders.
Building societies’ gross mortgage lending totalled £35.9bn - making up 29% of the overall market share. With £11.7bn in net mortgage lending - compared to £4.6bn at other lenders - building societies also accounted for 32% of all mortgage approvals.
When it comes to customer satisfaction, building societies really stand out. 93% of customers agreed their mutual offered good service, compared to just 87% of bank customers. And 86% said their building society offered competitive rates, while only 73% of bank customers felt the same.
With the Intermediary Mortgage Lenders Association (IMLA) predicting that 89% of all mortgage business will go through mortgage brokers in 2025, it’s so important for brokers - and networks - to continue working with building societies.
Among those 1.8 million borrowers coming up for remortgage, not all will fit into mainstream criteria and some will need a more personal approach. That’s where manual underwriting still shines, even as some other lenders move towards more automated solutions in 2025.
