Mortgage approvals by mutuals, also £1.8bn, were up by 16% in May compared to last year.
Net lending by mutuals in May 2011 was -£267m, compared -£658m in May 2010.
Adrian Coles, director-general of the BSA, says: “Although activity in the market is still considerably weaker than pre-crunch levels, mutuals have been increasing their mortgage lending and offering competitive products that continue to feature in the best-buy tables.”
The research also reveals that savings balances held with mutuals fell by £418m in May 2011, compared to a reduction of £373m in May 2010.
When the interest credited to accounts is excluded, mutuals had a net withdrawal of £613m, compared to a net withdrawal of £576m in May last year.
Coles says: “Following a strong April inflow, savings balances at mutuals fell in May, in common with other private sector deposit-takers.
“It seems likely that NS&I’s index-linked products attracted much of the money deposited in this period.”