Severe lending cutbacks from smaller building societies

Consumers hoping to get a mortgage from one of the UK’s smaller building societies could experience severe problems, as a number of these lenders have stated that they will be making severe cutbacks on their lending, and tightening up on their lending criteria. Like other lenders, smaller building societies are struggling to secure the finance that they need on the wholesale money markets to fund their lending, and with funds drying up they are having to be far more careful with regards to who they can lend to and how much business they can take on.

An official from one smaller building society explained how the society was finding it difficult to keep up with demand due to lack of funding. He said: “Wholesale money is difficult to get and we have come to a standstill at the moment. We are hoping it will just be for a month, but we have taken on so much we have just run out of money to lend at the moment.”

Another building society official explained that new lending had been restricted other than to qualifying applicants that lived in the local area. He said: “We were getting a lot of calls from around the country and we wanted to make sure that people locally can get them. Lenders are withdrawing rates and increasing them and limiting the percentage they will lend on. We are a bit loathe to do that and it is to make sure we don’t have to that we are restricting borrowing to people in our area.”

Many other smaller building societies have announced the withdrawal of various mortgage deals, as well as increased restrictions on lending and tighter lending criteria – a trend that many industry experts think will continue throughout the mortgage market over the coming year as a result of the global credit crunch.

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