The survey of financial services firms carried out by the Confederation of British Industry (CBI) said overall business volumes had grown at the fastest pace since the mid-1990s with the exception of building societies.
The CBI’s director of economics Rain Newton-Smith said building societies had ‘struggled’ in Q4 most likely because of a combination of the Mortgage Market Review, borrowers in the South East and London struggling to afford homes and more competition in the mortgage market.
But chief executive of the Building Societies Association (BSA) Robin Fieth (pictured) said mortgage regulation had had little bearing on societies’ performance. Instead, he pointed to the aggressive resurgence of high street banks flooding the market with low-rate deals.
“Given the mix of business that building societies do compared to the full service of banks in the survey, it is hardly surprising that some societies reported a slowdown in business volumes in Q4.
“We have also seen the high street banks coming back more strongly into the mortgage market in recent months in some customer segments and with some rates which could be described as loss leaders,” he said.
Fieth said a number of reports had indicated mortgage lending had slowed down towards the end of last year across the whole market. He said this could be attributed to rising house prices and affordability. He added: “Mortgage regulation may also have had some part to play, although most likely related to consumer sentiment.”
Chief executive of the Dudley Building Society Jeremy Wood questioned the CBI report’s findings which showed a decline in business volumes. “We’ve seen a gradual step up in business volumes in 2014,” said Wood.
Wood also rejected the suggestion that regulation had played any part in the output of the mutual sector.
He agreed with Fieth that the big players were now wading back into the niche markets traditionally served by mutuals.
Wood said that building societies had behaved consistently throughout the downturn and recovery helping borrowers who were originally shunned by larger lenders when credit conditions got tough but now wanted back.
“Some of these lenders feel more comfortable now. It is a pretty accurate reflection of herd mentality starting to take place. When things got tight there was a lot of belt tightening and then when things started to get easier very quickly the larger lenders have reacted with some very low but largely inaccessible rates.”
