Should we preach to the non-converted?

Bradford & Bingley's members have voted overwhelmingly to turn it into a plc - butthey may not benefit in the long run

In voting for the demutualisation of Bradford & Bingley last week, the building society's members were following a trend. Back in the days when the bowler-hatted Mr Bradford and Mr Bingley fronted its advertising, mutuality was flourishing and building societies offered a wide choice of savings and mortgages.

In voting for the demutualisation of Bradford & Bingley last week, the building society's members were following a trend. Back in the days when the bowler-hatted Mr Bradford and Mr Bingley fronted its advertising, mutuality was flourishing and building societies offered a wide choice of savings and mortgages.

But since Abbey National became a bank in 1989, nine building societies have converted too. And, by the end of the year, B&B will join them - nearly 1.6 million of its savers voted, with 94.5 per cent favouring conversion.

Of its borrowers who voted, 89.5 per cent wanted conversion too. So some 2.5 million savers and borrowers will each receive 250 shares in December.

Although Edinburgh-based life insurer Standard Life beat off the carpetbaggers last month, the trend towards demutualisation continues.

Yet this doesn't mean the remaining mutuals are giving up; they may be dwindling in number but they are still trying to demonstrate their benefits - whether by offering lower mortgage rates or preferential savings accounts to existing members.

With B&B already indicating that mortgage rates will rise while savings rates decrease, the facts speak for themselves.

"What we have seen with those building societies that convert is that they shift the focus away from the core base of savings and mortgages," says John Gully, spokesman at the Portman Building Society.

"Customers don't benefit. They get poor savings rates and higher rates on mortgages, while service levels diminish [with] branch closures."

He points to Birmingham Midshires, which was taken over by the Halifax Group last year. It has recently announced the closure of 47 branches, a third of the total.

On the other hand, Skipton, the UK's seventh largest building society, said on Thursday it was giving long-term members a one-off £500 payment on mortgage and savings accounts.

"Our members are getting the benefits of a conversion windfall but without the pain of demutualisation," says Mark Smitheringale of Skipton.

Not only will Skipton's members share in the record profitsof the first half of this year, rates will also be sustainedover the long term, says Mr Smitheringale. "Some of the mortgage banks are aggressive for new business. Once they get people on board they'll massage these rates down. We want to reward longevity."

Despite the benefits of mutuality (being owned by their members rather than shareholders, building societies plough back all profits), the attractions of a one-off share windfall often prove hard to refuse. But analysts predict that, due to market conditions, B&B members might not get the estimated windfalls of between £647 and £815.

A comparison of rates proves there's a lot to be said for not converting. Take mortgages. The standard variable rate (SVR) from the Halifax, which demutualised in 1997, is 7.74 per cent.

Former building societies the Woolwich and Northern Rock charge 7.75 per cent and 7.79 per cent respectively. But B&B offers a lower SVR of 7.64 per cent. Even better, the Portman and Skipton both charge 7.49 per cent. Nationwide, the UK's biggest building society, charges 7.29 per cent.

"Smaller building societies, especially in the North, offer lower mortgage rates," says Vivienne Starkey, independent financial adviser at Equal Partners.

When it comes to savings accounts, the mutuals do not do so well. On an instant access savings account, the Woolwich starts at 5 per cent on balances of £50 through its Card Saver account.

You need £500 in a B&B First Choice account before you get any interest at all, and then it's just 2.05 per cent. The Portman's Instant Access account pays just 0.5 per cent for between £5 and £499. Nationwide's internet account, e-Savings, is better, though, with 7 per cent on balances of £1.