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8 May 2008

Mortgage recovery will be slow warns BSA

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by Kay Mitchell

Mortgage recovery will be slow warns BSA

The credit squeeze has resulted in a mortgage drought that has seen the availability of cheap mortgages dry up.

Iain Cornish, chairman of the Building Societies Association (BSA), warned that mortgage markets will take 2 years to recover from the credit squeeze.

Mr Cornish added even when recovered, they will be very different to the early years of this decade.

However, on a positive note, Mr Cornish said a more sensible mortgage market should return in the longer-term.

Banks have been under much more pressure than building societies throughout the credit crunch as building societies do not have the same reliance on wholesale funding as some of the major mortgage banks.

According to the BSA, building societies benefited from the crisis at Northern Rock, with many customers moving their savings to societies.

As a result, their share of net lending has increased from 19% in the first quarter of last year to 25% in the same period this year.

However, the BSA believes that building societies are not immune to the liquidity crisis and the credit crunch, and will have to adapt.

There are now approximately 4,000 different mortgage deals on the market, compared with 15,599 last July.

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