Darlington Building Society has welcomed the progress of proposed new legislation that will make it easier for first-time buyers to get onto the property ladder.

The Building Societies Act 1986 (Amendment) bill aims to modernise building societies by cutting bureaucracy and expanding their lending capacity.

The bill, proposed by Julie Elliott, the MP for Sunderland Central, has received an unopposed second reading in the House of Commons, and will now undergo further scrutiny by MPs and in the House of Lords.

Darlington Building Society chief executive, Andrew Craddock, said: “We are delighted to see this important reform of the law moving forward without opposition.

“The modernisation element will cut archaic red tape by removing outdated corporate governance requirements, which building societies face but banks don’t.

“Crucially, as the building society sector directs a greater proportion of lending to first-time buyers than banks, the proposed funding limit amendments will benefit more people looking to get on the housing ladder.

“By enabling societies to provide additional mortgage lending, more hard-working people in the North-East and across the UK can benefit. Amendments will also support societies to weather periods of financial stress in future and help minimise risk in the banking sector.”

Building societies, which are owned by members rather than shareholders, account for a quarter of all new mortgage lending in the UK. They also direct a greater proportion of lending to first-time buyers than banks.

In the first nine months of 2023, 40 per cent of all building society lending mortgages supported more than 70,300 first-time buyers into their own homes.

Under the existing Act, building societies are required to raise at least 50 per cent of their funding from members’ deposits. The remaining funding comes from other sources known as ‘wholesale funding’.

The funding limit preserves the mutual status of building societies because it means they are at least half-funded but customer deposits. However, it also puts them at a disadvantage to the banks.

Amending the act would enable building societies to access emergency funding from the Bank of England in times of financial stress without it affecting their funding limits. This would enable them to lend more into the economy without risk.

Ms Elliott told the Commons that modernisation of building society legislation was “long overdue”.

She added: “Competition in banking is good for consumers and, given that building societies drive innovation, particularly in supporting first-time buyers, strengthening the sector is a great route to supporting aspiration across the UK.

“Prudent lending is crucial to the UK’s economic growth. Making this change will make building societies safe, more secure, and competitive in the long term, without affecting their status as mutuals.”