Speculation said the Co-op, which sells mortgages direct to consumers and through intermediary brand Platform, could pursue a rescue plan similar to that of the West Bromwich Building Society.
In that case the lender pulled back from the mortgage market following its financial troubles and axed intermediary lending completely, but the bank said that it was business as normal.
“Relationship banking is where we want to be in the future, and that includes savings and mortgages,” a spokesperson for the Co-op told Mortgage Solutions.
“The Funding for Lending Scheme figures show we have been accessing that scheme and have been lending, particularly targeting first-time buyers. The idea we are pulling back from that sector is not true.”
A Morgan Stanley report issued last week suggested that a debt-for-equity swap similar to the one used by Bank of Ireland in 2010 or a coercive tender applied by Anglo Irish would be a more preferable route for the Co-op.
Ray Boulger, senior technical manager at John Charcol, said that the Co-op needed to take swift action to restore confidence and that any reduction in lending through Platform would be the first sign of change in attitude towards mortgages.
“Clearly the Co-op need to do something pretty quick because the longer it drags on before confidence is restored the more likely it is they will need to be rescued,” he said.
“It seems to me that things are not that bad at the Co-op, but the danger is they could get bad quite quickly if they lose confidence and more deposits are withdrawn.
“At the moment Platform is being very competitive but one will have to look at that over the next two or three months, if they get less competitive that will clearly be a strong sign that their appetite is waning.”