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Ash4781

Building Societies - 'those Banks That Are Supported By The State Are Able To Compete Unfairly For Retail Deposits'

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http://www.bsa.org.uk/mediacentre/press/mo...tatsapril09.htm

Gross mortgage lending by building societies was £1,551 million in April 2009, compared to £1,571 million in March, and £3,921 million in April 2008.

Commenting on mortgage figures, Paul Broadhead, Head of Mortgage Policy at the BSA said:

“Gross mortgage lending by building societies was £1,551 million in April 2009, a similar level to March, but still 60% lower than gross lending in April a year earlier. Although also at low levels, building society mortgage approvals (which give some indication of future lending activity) were 14% higher in April than in March, after adjusting for seasonal factors. Therefore, the rate of decline in activity in the housing market may have started to slow, but overall the lending environment remains very challenging.â€

In the savings market, savings balances held by building societies grew by £80 million in April 2009, compared to £2,918 million in April last year. This can largely be explained by building societies experiencing a net withdrawal of £811 million in April this year, compared to a net inflow of £1,823 million in April last year.

Commenting on the savings figures, Brian Morris, Head of Savings Policy at the BSA said:

“In the current low interest rate environment there is evidence that households are looking to repay debt rather than save, and it is possible that there will be a net withdrawal (before interest credited) from the total UK savings market in 2009.

“Competition for retail deposits has become more intense since the wholesale markets effectively closed to all financial institutions. However, building societies have accounted for almost half the increase in savings balances in the UK since the run on Northern Rock bank in September 2007 to the end of March 2009. This is because societies have offered attractive accounts and are trusted by savers.

“However, those banks that are supported by the State are able to compete unfairly for retail deposits, and steps need to be taken to ensure that Government backing for some institutions does not distort competition for savings.â€

Building society statistics April 2009

* Building society gross lending amounted to £1,551 million in April 2009 compared to £3,921 million in April 2008.

* Net lending by building societies in April 2009 was -£722 million compared to £704 million in April 2008.

* Mortgage approvals in April 2009 were £1,599 million compared to £3,357 million in April 2008.

* Building societies had a net withdrawal of £811 million in April 2009 compared to net receipts of £1,823 million in April 2008.

* Including interest credited, savings balances held by building societies increased by £80 million in April 2009, compared to £2,918 million in April 2008.

* Building societies had a net receipt of £201 million from Cash ISAs in April 2009, compared to net receipts of £2,052 million in April 2008.

The gov' will have to do something ; housing market transactions are very low, wholesale is closed to many building societies, and deposit growth looks pretty non-existant. Get some rising bad debts and then profits, and capital will get wiped out.

Am I too pesimistic?

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