Mortgage lending squeezes again for mutuals

Building society mortgage customers repaid 543m more than they borrowed during the month.

The sector also suffered on the savings front, with customers withdrawing 775m more than they deposited, the ninth consecutive month this has happened.

Gross mortgage lending by building societies was 1.6bn in November, compared to 1.7bn in October. There is usually a reduction in lending from October to November, and when seasonal factors are adjusted for, lending was 1.5bn in November, the same as October.

Adrian Coles, director general of the BSA, warned that mortgage lending was likely to remain "relatively depressed" during 2010 until funding conditions for lenders improved further and more homes came on to the market.

He said: "Although the housing market has stabilised slightly in recent months following the drop in activity at the start of the year, lending is still at lower levels than a year ago. Funding conditions for all lenders are improving slowly, but these are still acting as a brake on lending, as is the relatively small number of properties coming to market. Lending activity is likely to remain relatively depressed in 2010 until funding and supply conditions improve."

On savings, he said building societies and other deposit takers continued to face heightened competition from institutions with a Government guarantee, which was distorting the savings market.

"There is little incentive for people to increase savings while the Bank Rate remains at its current low level, and many may prefer to use their money to pay down debts, finance spending or invest elsewhere," he said.

"Building societies and other deposit takers continue to face heightened competition from institutions with a government guarantee, which is creating further distortions in the savings market.

"In particular, National Savings offered a product in November which is likely to have resulted in substantial withdrawals from private sector institutions, including building societies."