Afternoon:
9°c
Rate cut will hit home loan funds say building societies
Jonathan Prynn, Consumer Affairs Editor3 Feb 2009
building societies today warned the Bank of England that another cut in interest rates this week will do more harm than good.
They said the expected 0.5 per cent reduction on Thursday would deter savers, reducing the supply of funds available for new mortgage lending.
Building societies usually account for about a fifth of mortgage lending and a fifth of savings accounts.
However, with the banking industry in crisis the building societies' share of net lending ballooned to 62 per cent in the fourth quarter of last year.
Adrian Coles, director general of the Building Societies Association, warned that without a flow of savings the lending for home buying would be in jeopardy.
He said: "Mortgage availability, rather than the cost of mortgages, has become a more pressing issue. This suggests that what is important to potential borrowers is maintaining the flow of mortgage funds to the market rather than reducing interest rates further."
Reader views (6)
I think Peter C is absolutely right. Let's have a fair interest rate to be levied on borrowers and an equally fair rate offered to savers. That way there's something for both sides of the market. Far too many schemes are offered with little or no thought given to the difficulties they bring in their wake. Let's get back to good old-fashioned repayment mortgages and dump the snazzy stuff PDQ!
- Burton J Helling, LE HOMMET D'ARTHENAY, FRANCE, 03/02/2009 18:59
Report abuse
If the rate is cut again it will be better to withdraw savings and buy Premium Bonds, the potential return will be greater.
- Len Welsh, Grays, England., 03/02/2009 18:42
Report abuse
The building societies are mutuals and therefore have to balance their outgoings against their incomings.They have not in general been as wasteful and profligate as the banks,but they do rely heavily on savers.Savers outnumber borrowers by 6-1 in this country.The societies have a duty to their savers as well as their borrowers.Failure to pay a reasonable return on savings will mean a run on the building societies and they won't have any money to lend anyway.The day of reckoning for borrowers is coming and fortunately for Gordon Brown and his crew of useless ministers.
- Bob, Ilford, 03/02/2009 14:28
Report abuse
I don’t think it will deter savers, it already has!
I despair at current situation this country finds itself in. The government have a blinkered vision showing their
socialist roots.
They show no regard for savers, using the Banks as the
total reason to the demise the current situation.
Where as, the true problem is that greedy people with
a ‘live now, worry tomorrow’ attitude, borrowed beyond
their means. Fueling Banks to invent even more bizarre
mortgages to feed their needs.
People should take responsibility for their actions as well as the Banks.
What happened to the straightforward, repayment mortgage?
Lost in a mire of tracker / etc. mess. Banks are now taking all the blame, fueled by Brown insisting that’s it their fault and having the audacity to keep reducing interest rates, So aiding the irresponsible lenders.
Prudent savers are taking the full force of Browns stupidity. With little room to maneuver their money, they are being stung month after month.
What’s needed is balance, a fair rate for borrowing with a fare return to those that save.
Remove these stupid mortgages. Introduce plain sensible
repayment methods giving a balanced system.
- Peter. C., rainham. essex., 03/02/2009 13:55
Report abuse
Agreed, Marlanne. And also the Building Societies thinking only of themselves and not of the nation, at a time of worldwide credit deficiency and falling demand generally
- Keith Price, Luton, England, 03/02/2009 13:19
Report abuse
Nah, sorry, not convinced. Sounds more like Building Society pleading not to have to lend money cheaply to me ...
- Marianne, SW France, 03/02/2009 12:21
Report abuse
