# Mutual Building Societies and the Credit Crunch



## ajapale (5 Jul 2008)

In the current climate of credit crunch do the few remaining Mutual Building Societies have a competetive advantatge over their demutualised sisters?

I remember credit crunches in the sixties/seventies where it was absolutely impossible to borrow from the banks and the mutual building societies were the only show in town as regards mortgages.


----------



## Brendan Burgess (5 Jul 2008)

Hi AJ

I have an idea that the Department of the Environment actually set the mortgage rate at the time and it was set at a level at which the banks could not lend profitably. The building societies also had a tax advantage in the 1960's and 1970's which made it cheaper for them to make mortgage loans. Banks were unable to compete. The result was a mortgage famine. People had to build up a 2 year savings record with the building society and then beg them for a loan after that. 



The market was leveled and the mortgage famine disappeared. 

So it was not a general credit crunch in the those years. 

We have two mutuals left at the moment - Irish Nationwide and the EBS. 

I don't think that they are any different from the other banks. They are now allowed to sell off their loans and I think that both of them have done so. So they can raise funds just as easily. 

Irish Nationwide is very heavily lent to a comparatively small number of property developers so it is likely that their liquidity is under more pressure than the EBS which is primarily a residential mortgage lender. Residential borrowers are not in as serious default as the property developers. I think that they are both borrowing on the interbank market where the credit crunch really hits.


----------

