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Building societies see mortgage lending topple

Monday, 30 June 2008 12:00 AM

Mortgage lending at building societies fell dramatically over the course of the last month, as the mutuals saw savings rise.

Latest data from the Building Societies Association (BSA) show net lending fell 90 per cent to £125 million from £1,262 million in May 2007.

Mortgage approvals in May 2008 stood at £2,337 million down 45 per cent from £4,264 million in May 2007.

Adrian Coles, director-general of the BSA, said: "The lending figures reflect the depressed state of the housing market.

"With 74 per cent of respondents to the BSA's property price tracker survey expecting property prices to fall over the next year, it is no surprise that demand for new mortgages remains low."

However, he urged caution over the low figures.

"It is important not to read too much into one month's very low figures. However, the figures do reflect the considerable adjustment in housing market activity now being experienced.

"We expect activity to remain at low levels for some time," Mr Coles explained.,

However, as lending tumbled amid the property slowdown and credit crunch, savings levels grew 40 per cent.

Building societies had net receipts of £853 million in May 2008 - the highest level since 2002 - compared with £608 million in May 2007.

Mr Coles said: "Yet again, savers have responded to the uncertain economic outlook by choosing the safety of a building society over the volatility of the stock market.

"High interest rates offered by societies, coupled with attractive product ranges, have seen customers continuing to flock to societies with their savings."

Daniel Barnes

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