Mixed message from lending figures

The latest figures from the Building Societies Association (BSA) revealed that mortgage approvals were down to £1,490m in July, compared to £2,636m the previous year. Net lending was -£577m over the month, compared to -£112m in July 2008.

The BSA said it expected the mortgage market to remain subdued for the remainder of 2009, because of the difficulties lenders face in raising funds for mortgages.

Adrian Coles, director-general of the BSA, said low interest rates, rising unemployment and weak earnings growth would create an environment in which it would be “very difficult” for deposit takers to attract funds.

He added: “The retail market is the most important source of funds for all lenders, and with wholesale funding continuing to be disrupted, it is perhaps not surprising that lending activity is constrained.”

The BSA also used its monthly e-newsletter, BSA Newsbite to hit back at claims that lenders were profiteering from the current climate, saying there were factors other than the Bank of England base rate to consider when pricing mortgages.

“Once these are considered, it is evident that lenders are not making as much profit as may first appear.”

A spokesman added: “Indeed, the results of the large banks show levels of profit at their UK retail operations dropped considerably in the first half of 2009, by about 78% year on year.”