MortgagesMay 30 2013

Of mutual benefit

Search sponsored by
BySimon Crone

It may have gone unnoticed by some, but while the big banks have been stalling, building societies have come up fast on the outside track.

The reluctance of larger institutions to lend may have been well documented, however the important role that mutuals have been playing in keeping mortgage lending activity levels stable in the meantime has been relatively unpublicised until recently. The latest raft of statistics has changed all this and building societies are starting to belatedly receive recognition for their part in keeping Britain moving.

According to the Building Societies Association, mutuals took a 25 per cent market share of gross mortgage lending in March, but other sources suggest this figure could actually be as high as 29 per cent. When you consider this is an 8 per cent year-on-year increase and almost double pre-credit crunch levels, it highlights not only how strongly building societies are performing, but how much lending from the banks has dropped off over the same period.

And it is not just overall lending where mutuals are punching above their weight either – further analysis of the data reveals that building societies are doing more to help new borrowers than their larger counterparts too. More than half of all mortgages available with deposits of 10 per cent or less are now accounted for by building societies, evidence of their commitment to a first-time buyer sector that banks can often pay lip service too without backing it up with actions – and products.

So how are building societies stealing a march on the banks and, proportionally speaking, ‘out-lending’ them? Much of their success can be attributed to the Funding for Lending scheme launched last year by the Bank of England.

Building societies may be accessing much smaller tranches of FLS monies, but their borrowers are noticing the difference. This stark contrast was highlighted by the update published by the Bank covering the period ending December 2012.

During the first six months of the scheme, £13.8bn had been accessed by lenders with Lloyds Banking Group (£3bn) and Santander (£1bn) accounting for the lion’s share. Yet despite this, both witnessed significant reductions in their cumulative net lending in the second half of the year and in their final quarter lending flows, with Lloyds’ activity decreasing by £3bn and Santander less active by £2.8bn. At the same time, a number of building societies made sure that what they received from the scheme was passed on.