Mortgage lending by building societies was down nearly a quarter in the first three months of 2023 compared to the same period in 2022, reflecting falling demand in the housing market.

This is according to the latest data from the Building Societies Association (BSA) however the figures also show that mortgage approvals in March alone picked up, suggesting some modest improvement in housing market activity.

The BSA reveals that gross lending in first quarter 2023 was £13.9bn, down 23% on first quarter 2022 (£17.9bn.

During the first quarter this year, building societies approved 85,234 mortgage loans, down 24% on the 111,723 mortgage loans approved in first quarter 2022, but up 13% on the 75,758 mortgage loans approved in the final quarter of 2022.

Building societies hold outstanding mortgage balances of £370bn, up 3% on first quarter 2022 (£358.2bn), a steady 23% share of the total mortgage market.

Building societies lent to 21,498 first-time buyers in first quarter 2023, 16% down on the 25,735 loans made in the same period in 2022.

BSA chief executive Robin Fieth believes the drop in gross mortgage lending compared to the same period last year reflects the impact on the housing market caused by the economic slowdown.

“Activity in March showed tentative signs that the market is recovering, with mortgage loan approvals 13% higher than in the final quarter of 2022, when the market was affected following the Liz Truss government’s ‘fiscal event’.

“However, lending volumes are likely to show continued weakness this year as the housing market responds to higher interest rates and strains on household finances from the higher cost of living”.

He adds: “Building societies continue to remain alert to borrowers facing a squeezed household budget and who may be worried about making their mortgage payments and are ready to offer a safe environment for a non-judgemental conversation alongside tailored support.”