Since the global credit crunch took a hold in the UK last year, larger banks have been clamouring to raise interest rates, withdraw mortgage deals, and tighten lending criteria in a bid to try and minimise on the damage caused by the crunch, which includes difficulties for lenders in obtaining finance on the wholesale markets in order to fund their loan and mortgage lending.
However, because smaller building societies mainly fund mortgages from savers’ deposits many thought that they would escape the turmoil that the credit crunch has caused.
A recent report shows that this is not the case, and now building societies are feeling the pinch as much as the larger banks.
In fact, the report shows that many smaller building societies are being flooded with applications from consumers who have been turned down or feel that they may be turned down by larger banks, and these smaller lenders cannot possibly hope to keep up with demand in the current financial climate.
As a result, many have had to close their doors on new lending, or have had to really tighten up their criteria and be careful about who they will lend to.
An official from one building society stated: ‘Any potential borrower who currently has a mortgage offer from us should rest assured. Those deals will be honoured. We will try to help existing borrowers coming off discounted rate deals where we can, but the reality is that borrowing is more expensive.’
One broker added: ‘Borrowers with such societies who are coming to remortgage should check whether the lender is prepared to offer a reasonable rate before checking the open market.’
One consumer who currently has a good rate with a smaller building society said he was worried that when it came to remortgaging he would not be able to get another mortgage with a building society. He said: ‘The market has tightened a lot.
I’m not sure we would be accepted for a mortgage with a small society now. It is a worry that if we did need to change our mortgage again there may not be much choice.’
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