Equity between Members

  • T. J. Gough


While the previous two chapters have been concerned with the two main categories of building society members (i.e. savers and borrowers) we have said little so far about the question of equity. Being mutual institutions, one would expect the building society movement to be interested in maintaining equity between these two categories. This view is supported by a statement by Mr Ralph Stow that interest policy was formulated ‘to bring about as far as possible the best balance of benefits between existing investing and borrowing members’.1 While the question of equity is partly in the building societies’ own realm through decisions on interest rates, it is also subject to a major outside influence — namely the rate of inflation. In this chapter we shall be particularly concerned with the real rates of return to building society investors and borrowers. But before turning to such matters it is necessary to say a little more about savers and borrowers.


Inflation Rate Saving Account Mortgage Rate Building Society Interest Rate Differential 
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    Building Society Affairs No. 93 (Building Societies Association, March 1978).Google Scholar
  2. 2.
    Mortgage Finance in the 1980’s p. 6 (BSA, December 1979).Google Scholar
  3. 3.
    Economic Advisory Group, Personal Savings and Wealth in Britain (Financial Times Ltd, 1975).Google Scholar
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    Building Societies and the Savings Market (May 1979), prepared for the Building Societies Association by the British Market Research Bureau.Google Scholar
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    BMRB, op. cit. p. 30.Google Scholar
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    It is important that the rise in real value is considered by the Inland Revenue as a capital gain not as income. Thus capital gains tax will be levied on this change, whereas income tax is deducted from the interest element. As capital gains tax is levied at a lower rate than income tax this increases the attraction of the bond.Google Scholar

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© T. J. Gough 1982

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  • T. J. Gough

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