Building Societies and Local Lending Behaviour

Abstract

This paper considers the determinants of variation in individual building society lending behaviour. A level of conformity in lending behaviour is identified, which it is argued results from a number of constraints that arise from the environment in which lending decisions are made. It is further argued, however, that considerable variation in lending behaviour is also apparent and is made possible by the practice of charging interest rates which are lower than the market clearing rate. The first part of the paper expands on these arguments and develops a model of managerial lending behaviour. The paper then continues with an examination of successful mortgage applicants in a sample of building society branch offices and attempts to show what statistical evidence there is for the pattern of variation and constraints described at the inter- and intrasociety levels.