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Borrowers back off as building society mortgage lending falls by almost a quarter

Nick Cheek
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Nick Cheek

Gross mortgage lending across building societies declined by 23% annually to £13.9bn in the first three months of the year, reflecting a drop in demand in the housing market, figures from a trade association showed.

The Building Societies Association (BSA) data revealed that this was lower than the £17.3bn lent in Q4 2022. Some 85,234 mortgage loans were approved in the first three months of the year, which was down 24% on the year before. However, this was 13% higher than in the previous quarter. 

Net mortgage lending totalled £548m, an 87% fall on the previous quarter’s £1.59bn.

Building societies held outstanding mortgage balances of £370bn in Q1, a 3% rise on the year prior and accounting for 23 per cent of the total mortgage market. 

Mutuals lent to 21,498 first-time buyers during the period, a 16% drop on the 25,735 loans issued to new homeowners during the same period last year. 

Building societies offering support

Robin Fieth, chief executive of the BSA, said: “The drop in gross mortgage lending compared to the same period last year reflects the impact on the housing market caused by the economic slowdown.  

“Activity in March showed tentative signs that the market is recovering, with mortgage loan approvals 13 per cent higher than in the final quarter of 2022, when the market was affected following the Liz Truss Government’s ‘fiscal event’. However, lending volumes are likely to show continued weakness this year as the housing market responds to higher interest rates and strains on household finances from the higher cost of living. 

“Building societies continue to remain alert to borrowers facing a squeezed household budget and who may be worried about making their mortgage payments, and are ready to offer a safe environment for a non-judgmental conversation alongside tailored support.”