Building societies have been hit hard by recent interest rate rises and have seen a decline in lending in June 2007 compared with the same period last year, according to the British Association of Estate Agents.
Figures released by the BSA show that gross advances for June 2007 were worth £4.65bn, compared with £5.14bn a year earlier, a fall of £490m. Net advances amounted to £1.18bn last month and £1.89bn in June 2006.
Loan approvals took a big hit with just £4.69bn approved in June 2007, compared with £6.05bn in the same period of 2006.
On the other hand, some savings have increased in popularity, with net receipts to cash ISAs increasing from £250m in June 2006, to £309m last month.
Commenting on the figures, Brian Morris, head of savings policy at the BSA, says: “The slow start to the summer has continued. Although 2007 started strongly, it seems the impact of successive interest rate rises is now being felt and is affecting affordability.
Typically, building societies are maintaining robust lending criteria and this is a possible explanation of the recent slowdown in building society lending.”
The BSA predict that a further rate rise, expected later this year, will cause lending to cool further during 2008.
Over the second quarter of 2007, Building Societies saw net receipts into savings accounts grow by 10.6% compared with the same period in 2006. However, this may be due to relatively low levels of saving in late spring last year, according to the BSA.
Morris adds: “the inflow in June was 12.3% lower than a year earlier. This suggests that households are finding their finances increasingly tight and that despite the higher rates of interest available, they are having difficulty saving.”
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