BSA claims building societies are not struggling like other lenders

 

May 16, 2008

Over recent months a number of building societies across the UK have reported that they have had to cut back on lending levels, restrict who they will lend to by changing their criteria, and withdraw various mortgage products from the market in light of the global credit crunch. Whilst building societies generally fund their mortgage lending from savers’ deposits rather than via securing funds on the wholesale money markets like banks, the reports suggested that smaller building societies had still not managed to escape the full effects of the credit crunch.

However, despite the cutbacks made by these building societies the Building Societies Association claims that building societies are looking healthy and that they have not suffered the full effects of the credit crunch like many other lenders. Officials claim that one of the reasons that building societies have had to tighten their lending criteria and cut back on lending is because they have been inundated with applications from consumers that are no longer able to get a mortgage through a high street bank or larger lender.

One official from the BSA said that the fact that building societies had cut back on their lending levels and tightened lending criteria did not mean that they had hit problems in terms of financing their mortgage lending operations. He said: “I don’t think they’re struggling, in fact very much the opposite. Building societies aren’t the only organisations out there that are cutting back on lending, competitors are as well. Just because they’re restricting lending doesn’t mean that they’re struggling.”

He added that some building societies had actually found themselves in a very good position as a result of the increased traffic that had stemmed from larger lenders being unable to help many consumers.

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