The Building Societies Association has revealed in its latest statistics that net lending by building societies in March 2008 also fell to £580m from £1,791m in March 2007.
Approvals were £3,018m compared to £5.243m at the same time a year ago.
This is in direct contrast to the record level of savings inflows building societies are experiencing. March saw a record of £1,26bn compared to just £0.7bn in March 2007, representing a 70 per cent increase.
BSA director general Adrian Coles says: “Lending at building societies was down year on year. This is partly due to building societies withdrawing products and increasing rates on new lending so that they do not become overly competitive.
For example, as other lenders withdrew from the market, some building societies found themselves offering best buy deals and were inundated with applications. They too were then forced to limit their lending, not because of funding difficulties, but in order to preserve the high levels of service that distinguish building societies from other providers.
Furthermore, this may also be due to a greater level of uncertainty in the housing market causing prospective buyers to hold back until the direction of house prices becomes a little clearer.”