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Spend & Save

Invasion of the carpetbaggers

Building societies are raising the minimum required to open new accounts to deter non-locals after cash incentives. By Clifford German
Speculators are still stuffing cash into new accounts with building societies at a rate of pounds 50m a day as the scramble to open accounts and qualify for a cash bonuses or a share handouts continues.

Last week, Northern Rock announced plans to become a bank and turn its members into shareholders. This week, Bristol & West has agreed to surrender its independence and mutual status to the Bank of Ireland. Speculators who have opened accounts since the start of this year will only get a modest pounds 250 of preference shares as a reward for their persistence, but this is still better than the proverbial poke in the eye.

Meanwhile, the public is playing hunt-the-treasure with an enthusiasm only exceeded by lottery addicts. Several billion pounds have been invested in new accounts with building societies this year in anticipation of a quick reward for approving a takeover or a conversion. Money was initially rushed into the top 10 societies, which were most likely to convert into a bank and issue shares to members if they approved the conversion. But as the bigger societies have announced plans to convert or be taken over, the speculators have started investing in the smaller societies that have moved up the list into the top 10 to replace Alliance & Leicester, Northern Rock and Bristol & West.

A significant amount of the cash from maturing Tessas has been invested, and attempts by some societies to deter "carpetbaggers" by raising the minimum investment needed to qualify for voting membership of the society and the right to share in the sweeteners has only increased the rush.

Even those societies that have committed themselves most outspokenly to remaining mutual, such as Nationwide, Bradford & Bingley, Britannia, Portman, Yorkshire and Coventry, say they have had an upsurge in new accounts. In general, however, it has not been enough to cause great problems in the branches or to overwhelm the societies with money they cannot hope to on-lend in the current depressed state of demand for mortgages. But investors encouraged by media speculation have been turning their attention to Birmingham & Midshires, creating queues that have disrupted normal service, particularly in several big city branches where fat cats scent a quick profit. On Monday, the board responded by raising the minimum investment needed to open a new membership account from pounds 100 to pounds 500 in its smaller branches and to pounds 1,500 in 17 big city branches, mainly in Birmingham, Manchester and London.

Leeds & Holbeck and Chelsea moved yesterday to raise still further the minimum investment needed to open an account and qualify for instant membership. Some societies have renewed their commitment to remaining mutual, serving their local communities by discriminating against investors from outside their home territory. Derbyshire has just raised the opening balance required for new membership accounts to pounds 1,000 for investors living outside its Midland core area. It followed the example of Cheshire, which raised the threshold for new investor/ members living outside its core Granada TV area to pounds 2,500, although locals can still qualify with pounds 100.

Our table shows the top 12 surviving building societies committed to remaining mutual, and the minimum amounts required to open a new account that qualifies for membership. They will convey instant membership, although most of them are notice accounts, and the rate of interest they pay, if anyone still cares about that, will vary significantly.

The top 12 list looks quite different to what it was a year or two ago, when it was dominated by Halifax, Nationwide, Woolwich, Leeds Permanent, Cheltenham & Gloucester, Alliance & Leicester, Bradford & Bingley, National & Provincial, Britannia, Northern Rock and Bristol & West.

All but three of that top 12 have announced their intention to convert into a bank or be taken over by another financial institution. Nationwide, Bradford & Bingley, Britannia, Yorkshire and Birmingham & Midshires are the five biggest surviving societies still apparently committed to mutuality.


What it costs to join the remaining mutuals

Rank Society Minimum Deposit pounds

1 Nationwide 500

2 Bradford & Bingley 500

3 Britannia 500

4 Yorkshire 100

5 Birmingham Midshires 500/1500*

6 Portman 100

7 Coventry 500

8 Skipton 2500

9 Leeds & Holbeck 500*

10 Chelsea 1000*

11 Derbyshire 100

12 Cheshire 100/2500*