Figures from the Building Societies Association (BSA) showed that during Q3 lending was down annually at £16.4bn this year compared to £20.2bn last year.
The association said although lending volumes were down, the rise in market share resulted in mutuals increasing mortgage balances by £6.1bn over the nine months to September. Meanwhile, balances at other lenders decreased by £4.5bn as borrowers repaid more than the gross amount lent out.
Building societies approved 272,891 mortgages in the first nine months of 2023, which accounted for 35 per cent of the market.
Compared to last year, this was down on the 331,890 mortgages approved.
Some 70,333 of these were first-time buyers which made up 38 per cent of all lending by mutuals.
The BSA said higher interest rates put a strain on affordability and led to a slowdown in mortgage market activity.
As of October, the average rate for a two-year fix offered by banks and building societies at 95 per cent loan to value (LTV) was 6.6 per cent and at 75 per cent LTV was 5.63 per cent. The average standard variable rate was 8.01 per cent.
The association said there had been a rise in people struggling to repay their mortgages but because mutuals have a lower risk approach to lending, there were “proportionately fewer loans in arrears”.
