Brown's bubble lets off wind

The large-scale effects of the "credit crunch" continue to drop into the wider market. In March, lending by building societies dropped by 68% on an annual comparison. This compares with a general drop of 40% in the overall mortgage market. Mortgage providers are no longer able to raise capital in the money markets and are attempting to stay at the bottom of 'Best Buy' tables.

Mortgage lending by the UK's building societies has slumped by more than £1bn, according to new home-loans data. Building societies advanced net loans of just £580m in March, down from £1.8bn in the same month last year.

The 68% decline means that building societies are scaling back lending as a result of the credit crunch even more severely than major mortgage bank rivals, such as Halifax and Cheltenham & Gloucester.

Societies are now lending to one in 10 would-be homeowners, compared with a traditional level of almost one in five.

Bank of England data shows that the market for home loans shrank by more than 40% in March compared with the same month last year. But it also shows building societies reducing their share of net lending, which includes customers repaying their mortgages, at a faster rate than the overall market.

The number of companies in liquidation is up by 54% in the first quarter, as entrepreneurs are unable to roll over their loans or raise more capital. There are now indications that cost control measures to cut spending whilst retaining staff have almost run their course. If that is so, expect large-scale redundancies.