The BSA’s annual chief executive opinion survey showed that they predict the Base Rate will remain low, with an average forecast putting the rate at 0.83% at the end of 2010 and 2.17% by the end of 2011. This will continue to restrict mortgage funding, while helping those struggling with mortgage repayments.

The mutual bosses also said they expect house price gains to be retained in 2010, but anticipate that the rate of growth will slow, with an average forecast of a 1% rise over the year.

In addition, chief execs fear that the FSA’s Mortgage Market Review could have a negative effect on the industry through increased costs and the potential for a large section of self-employed borrowers being frozen out of the market.

Retail savings balances are predicted to only grow by £28m in 2010, similar to the levels seen in 2009, which will have a detrimental impact on the funding available for mortgage lending. By comparison, retail savings grew by £58bn in 2007 and 2008.

Adrian Coles, director-general of the BSA, commented: “Compared to the hectic events of over a year ago, chief executives can now plan for the future, notwithstanding the continuing challenging conditions. Mutuals continue to examine how they can cut costs, without compromising on member service.

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“Mutuals bring democracy, competition, diversity, customer focus and a risk averse culture to the market. There’s never been a better time for these mutual values to challenge the plc banks.

“What mutuals really need from any new government is a guarantee of a level playing field on capital, liquidity and funding. Mutuals should be able to compete fairly with those institutions that required direct taxpayer support in recent years.”