Officials claim building societies looking healthy

 

May 10, 2008

Over recent weeks there have been a number of reports claiming that building societies in the UK are now starting to really feel the effects of the global credit crunch, with a number of building societies having taken action to protect themselves against these effects. It was originally thought that building societies had managed to escape the problems that banks were facing in terms of getting finance on the wholesale markets, as most building societies fund their mortgage lending through savers’ deposits.

In recent reports a number of building societies have stated that they have had to restrict lending, withdraw certain mortgage products from the market, and cut back on lending levels due to the increased demand from consumers not able to get a mortgage from their struggling banks, and this has led to them tightening their lending criteria in a similar way to banks.

However, officials from the Building Societies Association have stated that building societies are looking health despite the effects of the credit crunch, adding that restricting lending does not mean that they have hit problems.

One official from the BSA 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 the problems in securing finance from the wholesale money markets had not affected building societies in the same way that they had affected banks, and said that the fall back from consumers not being able to get finance from their banks had put some building societies in a very good position.

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