Building societies feeling effects of credit crunch
April 16, 2008
The global credit crunch that swept across the UK last summer has taken its toll in al financial sectors, and as a result of the credit squeeze, many lenders have had to alter their lending criteria and cut back on their lending levels and have made significant changes to their lending criteria. Many banks have found that getting finance on the wholesale money markets has become extremely difficult and expensive, and because of this they have had to tighten up on who they will lend to, how much they can lend, and how much they charge for borrowing.
Until recently, however, it was thought that whilst banks and larger lenders seemed to be really suffering as a result of the global credit crunch, building societies had largely managed to escape the damaging effects of the credit squeeze. This is because building societies tend to fund their mortgage lending through savers’ deposits. However, recent reports have indicated that building societies may also be suffering as a result of the credit crunch, with many reporting that they have had to restrict new lending and cut back on the amount of business that they take on.
Some smaller building societies have announced that they are not taking on new custom, or are restricting new custom to those that live in the local area. Others have withdrawn various products from the shelves, making the choice of mortgages far more restrictive for customers. A number of building societies have admitted that they are finding it difficult to keep up with demand, with a mass influx of applications resulting from a greater number of people being turned down by banks.
This is bad news for the many borrowers who have already been turned down by banks or are expecting to be turned down by larger banks, and were hoping that smaller building societies may have been able to help with getting a mortgage.
Recent additions:
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- There could be good news for savers
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- ICICI succumbs to interest rate fall
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