Fads and Fixes — Waving Goodbye to Quality in Financial Services?

Abstract

Until the 1980s the building societies, which had their origins in the mutual self-help organisations of the eighteenth and nineteenth centuries, had the home loans market largely to themselves, and operated an interest rate cartel, with the Building Societies Association (BSA) publishing recommended rates of interest. Building societies did, however, face strong competition in the market for deposits, with the banks and National Savings all seeking to attract the savings of the personal sector. The building societies enjoyed fiscal privileges over other financial institutions, and their investors received favourable tax treatment, while the tax regime discriminated in favour of borrowing for house purchase, the building societies’ primary function.