Building societies evolved in the 18th Century as a way for people to buy a house by pooling savings and mortgages. Many of the early building societies were temporary i.e. the aim was to pay off a mortgage and then close down the building society. However, permanent building societies emerged as more people wished to take advantage of the opportunity to take out a mortgage against the value of their house.
Building societies are traditionally non-profit making, but, in the 1980s financial deregulation encouraged many building societies to demutualise and become profit making banks. Some of the biggest building societies to make the switch include the Halifax, Abbey national, Northern Rock and Alliance and Leicester.
Ironically, it was the former building societies who were most affected by credit crunch 2008-11. This was because they had been most aggressive in seeking growth through ambitious lending.
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