The uplift in gross lending resulted in the market share of mutuals rising from 17% in 2011 to 22% in 2012.
Adrian Coles, director-general of the BSA, said: “Mutual lenders such as building societies are likely to continue to play a prominent role in the mortgage market in 2013 helped in part by the Bank of England's Funding for Lending Scheme.
“Well over half of the 35 firms signed up to the scheme in December are mutuals and we are positive that the full potential of the scheme and its benefits to homebuyers will be demonstrated as the year progresses.”
And net mortgage lending by mutuals accounted for £6.5bn of the £7.4bn total net lending in 2012 with December reaching net lending of £0.4bn.
Ben Thompson, managing director of Legal & General Mortgage Club, said the lending figures were “highly impressive” and underlined the growing importance of building societies.
He said: “Only a few years ago some were quick to question their business models and perhaps future role in this sector. However it is explicitly clear today that they play a tremendously important role.”
Thompson attributed their success to the competitive mortgage products offered to borrowers that sometimes cannot secure borrowing elsewhere.
He said: “This is typically through taking a personal or more tailored approach to underwriting. Allowing customers to buy where in the absence of this approach they might not have been able to, is very important in helping to grow this fragile mortgage and housing market.”
Sean Oldfield, chief executive at Castle Trust, agreed that the unique selling point of innovation must be continued.
He said: “The focus for building societies must remain on creditworthy customers. But the development of innovative mortgage products is absolutely crucial for them in creating a competitive sector that provides a wealth of mortgage financing options for millions of homebuyers.”
Savings balances at mutuals also increased by £2.7 billion in 2012.
Coles added: “Mutuals take care to balance the needs of both their savers and borrowers but this can be challenging when economic policy is designed to encourage spending and discourage saving in order to stimulate economic growth.”
