Gross mortgage lending by building societies has fallen like a stone, according to new figures published by the Building Societies Association (BSA).  In May, the mutual sector lent £1,515m, compared to £3,530m in May 2008.

Commenting on the figures, Adrian Coles, Director-General of the BSA, said the May total was similar to the previous two months, but was still 57% lower than gross lending in May last year.

"Building society mortgage approvals were also at similar levels to recent months. However, the £1,607m of approvals in May were still about 35% lower than the value of mortgages approved in May last year. Therefore, while the mortgage market appears to have recovered slightly from the start of the year, levels of activity remain depressed."

In the savings market, savings balances held by building societies fell by £106m in May 2009, compared to an increase of £1,162m in May last year. This was due to building societies experiencing net withdrawals of £494m in May this year, compared to a net inflow of £855m in May last year.

Commenting on the savings figures, Mr Coles said: "Competition for retail deposits remains intense, as all institutions continue to find their access to wholesale funding markets restricted. However, those banks that are supported by the state are able to compete unfairly for retail deposits, and steps need to be taken to ensure that government backing for some institutions does not distort competition for savings.

"Overall, building societies offer attractive savings accounts and are trusted by savers. As a result, societies have attracted substantial inflows since the financial crisis began."

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