Building society lending remains subdued

The latest figures from the Building Societies Association (BSA) reveal that although lending was broadly similar to recent months after seasonal factors were adjusted for, the market was still very depressed compared to previous years.

Mortgage approvals in August 2009 were £1.2bn, a huge drop compared to £2.8bn in August 2008. In the savings market, balances held in savings accounts fell £202m in August.

Excluding any interest credited to accounts, building societies experienced a net withdrawal of £473m.

Adrian Coles, director-general of the BSA, said activity will not return to normal despite signs of a modest improvement in market conditions in recent months.

Coles added: "Balances held at building societies fell in August, which signals that savers are continuing to withdraw more money than they save. This is not surprising given the very low bank rate, and the difficulties faced by many households, with job losses rising and income growth remaining subdued. These factors are affecting all deposit-takers in the UK."