Building societies' net lending picks up in September

Net mortgage lending by building societies increased to £314 million in September, from -£37 million in August, but was still 47% lower than the figure for September last year, according to the Building Societies Association (BSA).

Gross mortgage lending by building societies was £3.1 billion, a decline of 22% on September 2007, as buyers continue to stay away from the market.

Commenting on the figures, Adrian Coles, Director General of the BSA, said: "With the housing market depressed as house prices continue falling and with confidence amongst potential homebuyers low, it is no surprise that mortgage lending is down on last year, and the mortgage market is unlikely to recover for some time. Nevertheless, the increase in net lending in September is to be welcomed."

Turning to the savings figure, Mr. Coles said: "Although there were net withdrawals of £170 million in September, this represents just 0.9% of the net receipts received by the sector over the last year. It is the first outflow since January 2007, when £196 million was withdrawn from building societies.

"This outflow can be partly attributed to the extreme turbulence in the financial markets in September. This generated uncertainty amongst savers, who clearly valued the safety offered by publicly owned deposit takers.

"It is also notable that, unusually, there was also a substantial withdrawal by individuals from bank accounts. It seems likely that the whole of the private financial services sector was affected by competition from the public sector.

Furthermore, a significant number of fixed rate bonds matured over September. This further contributed to the outflow."