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Wednesday 2nd April 2008
Building societies saw a rise in savings taken in February, but mortgage lending fell as the credit crunch and a slowing property market take effect.
Building society gross lending stood at £3,860 million in February – down 5.8 per cent from January and down 8.1 per cent on last year.
Net lending – taking into account repayments – fell to £974 million in February 2008, a fall of 31.7 per cent on January.
Brian Morris, head of savings policy at the Building Societies Association (BSA), said: "Net lending by building societies is down compared to this time last year.
"This suggests the lower levels of activity in the housing market reported by the Land Registry yesterday for December are continuing into 2008."
There was a small ray of hope as mortgage approvals – a key guide to the future health of the property market – rose for a second month to £3,411 million, but are still down 26.55 per cent on last year.
However, the high interest rates that have deterred borrowers have been a spur for savers.
Mr Morris said: "Building societies have enjoyed another strong month as high interest rates and attractive products have encouraged people to save with societies.
"The continuing economic uncertainty and volatility in stock markets have provided further incentives to put money in cash savings."
Building societies had net receipts of £1,350 million in February 2008, compared to £782 million in February 2007, while ISA net receipts rose 5.7 per cent on last year to £130 million.
Although building society lending has dropped, the lenders still offer the best value for borrowers, according to new analysis.
Online mortgage firm mform.co.uk finds Yorkshire Building Society, Furness Building Society, Chorley Building Society and West Bromwich Building Society are the most competitive lenders. The top five was completed by Abbey.
Francis Ghiloni, mform business development director, said: "The mortgage market has gone through an unprecedented period of turmoil in the past three months with products being withdrawn and tougher conditions being imposed on borrowers. Some lenders have effectively shut up shop."
He added: "Borrowers need to understand that simply because a lender was excellent when they last bought a mortgage, it doesn’t follow that they will still be the best.
"It changes every day which is why borrowers should search the market as widely as possible when sourcing a mortgage."
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