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Mutuals warn mortgage rates to rise after £1bn FSCS bill

Six out of ten building societies have warned that they will have to increase mortgage rates to offset the £1bn FSCS bill imposed on the sector.

Research from the Building Societies Association has found the majority of building society chief executives agree on is that the FSCS levy will have
considerable impact on their business – and therefore their members.

When asked, 60 per cent believe mortgage rates may have to rise, with 53 per cent thinking savings rates might have to fall in order for societies to meet the costs of the FSCS levy.

But despite the downturn, society chief executives have a generally positive outlook with 55 per cent remaining optimistic about 2009.

BSA director-general Adrian Coles says: “The last 12 months have certainly been tumultuous, but it’s encouraging to see that the majority of building societies have a positive outlook.

“Despite challenges faced by building societies, their chiefs feel they are in a strong position to overcome them. The next year is not seen as a period of growth, but a time when balance sheets can be strengthened, and the business primed to take advantage when market conditions become more favourable.”

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