Business News |
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Building societies under renewed pressure
While the last two years has seen a number of small and medium-sized
building societies merge or be taken over, the remainder are facing a tough
fight for survival.
With the UK's banks required to repay around £319 billion of emergency
government finance in the next three years, these banks will then be forced
to into direct competition with building societies for savers' money in
order to finance their own lending activities.
Lenders will continue to experience difficulties in borrowing funds from
other financial institutions, lengthening the period of severe mortgage
rationing we are currently experiencing and squeezing the profitability of
some lenders.
Building societies already experienced a net deposit outflow of almost £8
billion in 2009, which forced them to reduce their lending and cut costs.
The lack of sufficient funds for mortgage lending, coupled with possible
higher interest rates and unemployment, will further reduce their level of
funding from savers, putting even greater pressure on their finances.
