Building societies ‘primed’ for mortgage lending

Posted 2008-03-26

The UKs building societies are in an ideal position to maintain current mortgage lending patterns in spite of the credit crunch, it has been claimed. Banks and other financial institutions largely rely on global money markets and inter-bank lending to securitise their loans - both of which are still struggling with severe funding bottlenecks following the US sub-prime crash. But because friendly societies take a different approach to mortgages - relying instead on members contributions - the Building Societies Association (BSA) has argued they remain largely unaffected by the difficulties. "Unlike a lot of their PLC competitors, [building societies] are very successful at getting funding, and that actually puts them in a very good position to continue lending," commented Neil Johnson, PR and policy manager for the BSA. He explained that problems in wholesale markets have largely passed over building societies because they depend far more on retail deposits and personal savings - both of which remain buoyant in the current economic climate. The BBC recently reported that five building societies have restricted mortgage lending in recent months due to an influx of new customers.

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