Gross lending by mutuals up 32% in 12 months

Building societies and other customer-owned lenders and deposit takers, known as mutuals, are continuing to play an active role in a mortgage market that is showing signs of recovery.

Figures released by the Building Societies Association (BSA) show that gross lending by mutuals in August was up by 32% to £4 billion, compared to £3 billion in August 2012. However, the number of loans approved across the entire market is still below the historical average. 

For the first eight months, net new lending was £8.2 billion, an increase of 87% on the same period in 2012. The £8.2 billion of net lending by mutuals in the eight months to the end of August 2013 also more than offsets the negative lending figures from other lenders. This meant that the total net new lending into the UK housing market has been £5.6 billion.

The statistics also show that 9,000 loans from mutuals in August, a third of all loans, were made to first-time buyers. 

Commenting on the figures, Adrian Coles, director-general of the BSA, said, “Mutual lenders have sustained their activity in, and support for, the UK housing market and homebuyers over the long-term. Consumer sentiment has now clearly turned the corner and is beginning to improve.”

“However, sentiment can be fragile and it is vital that unexpected surprises and overheated rhetoric are avoided. Viewing today’s market in context, it is certainly getting better, however, the number of loans approved for house purchase in the past three months ran at around 60,000 a month, less than two thirds of the historic average.”

On Sunday, prime minister David Cameron announced that the controversial Help to Buy scheme, which will allow people in England to take out 95% mortgages, will be launched this week, three months ahead of schedule.

The mortgage guarantee will allow customers to buy any property with a value up to £600,000 with a deposit of only 5% of the purchase price, and has been rescheduled despite concerns that it could create a new housing bubble.

Coles added, “To deliver solutions to the growing housing needs of the UK and to provide balance to the supply/demand equation that drives prices, there is no doubt that we need more homes to be built.”

In September, a report by the leading accountancy firm KPMG claimed that building societies had returned to a healthy state after the financial crash of 2008.

Richard Gabbatas, a co-author of the report, argued that they still needed to adapt to survive, saying, “Societies are part of the fabric of the UK’s financial sector and what is certain is that they will evolve and adapt to the changing needs of their members. Evolution rather than revolution will ensure that there will still be a healthy building society sector in 20 years’ time.”

Further reading:

Help to Buy scheme to launch three months early

KPMG report says building societies are back to ‘business as usual’

House prices rising at fastest rate in seven years