In a win for the mutuals, the Prudential Regulation Authority (PRA) agreed to their request to relax the restrictions on their lending limits to allow them to support more borrowers, as demand for mortgage finance rockets.
The PRA has agree to suspend the fixed-rate lending restrictions, which mostly affect small and mid-sized building societies, although they cannot exceed their original limit by more than 10 per cent.
The regulator said the “Covid-19 related dispensation” will remain in place until 31 January 2021.
Jeremy Palmer, head of financial policy at the Building Societies Association, said: “We’re pleased the PRA has listened to our idea for the fixed-rate lending limits to be temporarily lifted given the demand for mortgages we are seeing right now. The market is pretty much all fixed-rate lending so we went to the PRA and suggested they relax the lending limits, which tend to apply to small and medium-sized societies more than the larger players. Those societies will now have the scope to offer more fixed-rate lending over the next six months.”
In a letter from the PRA to building societies, Mel Beaman, director, UK deposit takers, wrote: “…we acknowledge the desire of some societies to be able to react more quickly in the current environment, and agree to suspend the relevant guidance levels on fixed-rate lending limits in the Sourcebook for an initial period of six months, running from Saturday 1 August 2020 to Sunday 31 January 2021.”