Building Society flotation possible or not ?

Assuming they're still a Mutual society, it's *possible* that they might de-mutualise in future - but a lot less likely than it used to be. This is because all such societies now require any new customers opening an account to agree to assign any windfall payments to charity. This effectively prevents a large group of people from opening accounts and then passing a motion to de-mutualise at a general meeting. So they can no longer be

*forced* by relative outsiders to de-mutualise.

However, if they *do* do it, people whose accounts pre-date the rule changes will still benefit.

In the present financial climate the remaining building societies are unlikely to de-mutualize. With the loss of market funds banks are re-learning the value of customers. On the whole, building society savers are far more loyal.

Provided the account is still in existence. I thought paying off a mortgage closed it.

Which is why the OP suggested *not quite* paying it off.

I'd have thought it would be better to pay it off and avoid paying any more interest than wait for a slight possibility of getting a windfall payment.

If they allow that, then of course the account remains open, and membership rights presumably continue.

Though de-mutualisation might now be a distant prospect, as you say, there are still advantages in being a member of a small society, which may well be snapped up in the current economic climate by a larger one. You would then still be eligible for a payment of perhaps a few hundred pounds. I think the Catholic Building Society was just recently taken over in just such a way for example. And before that there were the Portman and the Lambeth, both taken over by Nationwide.

"gbh" wrote

... and the value of their shareholders, through Rights Issues. What's the equivalent for a building society, to a Rights Issue for a bank? Oh yes, it's them de-mutualising...

"gbh" wrote

Is that more valuable than the funds that would be realised from floating ... ?

"Mark" wrote

If they only left (say) 100 on the mortgage, then the mortgage interest might only be around 7 per year. If they invested the 100 (that they didn't use to pay off all the mortgage) in a good savings a/c, then they might receive around 5 per year interest (net of tax).

That means they'd only be paying around 2 per year to have the chance of sharing any windfalls...

Another issue is the type of account. If it's of the flexible variety, the borrower may, by keeping the account open, retain the right to re-borrow up to the amount originally borrowed, without having to be re-approved. This may be a much bigger advantage than the prospect of a windfall.

Agreed.

If the OP is expecting a windfall, mightn't the amount be linked to amount borrowed?

Probably not. AIUI it has been the case with previous demutualisations that you are considered a member if you have *any* account (deposit or loan) and that every member receives an equal share of the pot, no matter how much you have invested or borrowed.

The rules might vary from society to society, though.

Not sure if you're counted as several members if you've several accounts.

Given that you can invest 3600 pa in cash in a tax free ISA generating 6 to

6.5% tax free, depending on the mortgage deal you have, you could even be better off.

The other point to consider is who will take care of the property deeds once there is no mortgage. The mortgage company will not want them anymore which means either lodging them with a bank or solicitor for safe keeping which will cost. For that reason alone, it is probably worth keeping a small mortgage on any property.

You usually qualify once if you're a saver, and once if you're a borrower, so it's possible to receive the payout twice over. The payout doesn't usually depend on how much you owe on your mortgage, but there is often a sliding scale for savers with everyone receiving a minimum amount, plus a set percentage of any higher savings balance up to a certain maximum. But they do differ, and societies are free to make their own rules.

Dear all, Thank you so much for your very helpful replies, on the basis of them I will keep a very small mortgage on. Around £100 left on will hopefully secure any rights referred to, and save the problem of deed security into the bargain. Many Thanks again to everyone who replied. Anne.

"AndyC" wrote

... or just chuck 'em in a shoe box and stick it in the wardrobe. No probs!

[Assuming, as most are, they are registered.]

My building society sent me the deeds, saying that they no longer wanted to look after them (or a reason like that). The mortgage is still running.

But they might merge, like Portman and Nationwide (and some other BS merged with Portman before that). Bonuses were paid to Portman members when they merged with Nationwide.