BSA warns that mortgage costs could increase
November 30, 2009
The Building Societies Association has recently warned that the cost of mortgages could rise despite the record low base rate, and this is because of increasingly stringent regulations with regards to mortgage lending coupled with a battle to attract more retail deposits.
Chief Executive of the BSA, Graham Beale, was speaking at the organization’s annual lunch, where he said that these factors could have a detrimental effect on mortgage lending costs.
Mr Beale went on to state that building societies were struggling to attract new deposits from savers to shore up their finances, and this was due to stiff competition from other financial institutions, which could also affect the cost of mortgages.
He said that the demand for retails deposits had become intense, and competition amongst financial institutions was resulting in some savings rates being pushed up to uneconomical levels.
This, he added, would mean that at some point the rates paid on savings would have to fall or the cost of borrowing would have to go up in order to create balance.
Beale also warned that new regulations that have been proposed by the Financial Services Authority would put further pressure on lenders and mortgage costs.
In some cases these regulations will make it more expensive for lenders to fund their mortgage lending activities, and Beale said that the FSA needed to make sure that the new proposals took into account the position of building societies.
During the lunch Mr Beale also went on to defend the role of building societies within the financial sector, stating: “Lord Adair Turner expressed a view that banks are socially useless. He may or may not be right. What I do know is that building societies are of profound benefit to local communities throughout the UK and society generally.”
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