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Building society gross lending peaks

Gross lending by building societies in July reached its highest monthly figure this year.

According to the Building Societies Association, gross lending in July reached £2.1bn, up from June’s £1.97bn, but still 42 per cent lower than the £3.6bn lent by mutuals in July 2008.

BSA director general Adrian Coles says: “The mortgage market continues to show signs of some sort of recovery when compared to the first few months of this year. However, activity remains very depressed when compared to previous periods.”

In the savings market, balances held in savings accounts with building societies reduced by £900m, compared to an increase in balances of £1.9bn in July 2008.

Coles says: “Low interest rates, rising unemployment and weak earnings growth create an environment in which it is very difficult for deposit takers to attract funds. Across the market, savings flows are much lower than a year ago, and this trend is likely to continue. The BSA estimates that total UK savings balances might struggle to increase by £11bn in 2009, much lower than the £60bn increase in balances in 2008.”

The BSA figures for July found that mortgage approvals in July 2009 were £1.49bn compared to £2.64bn in July 2008.

Coles says: “The BSA expects the mortgage market to remain similarly subdued over the remainder of 2009. This is primarily because of the difficulties all lenders face in raising funds for mortgage lending. We warned back in March, when Bank Rate was cut to its present level, that the flow of funds into the mortgage market would be restricted as savings inflows decline as a result of very low interest rates.”

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