LAST month's half-point rise in interest rates has not yet had a

significant impact on mortgage lending, the Building Societies'

Association claimed yesterday.

But it warned that further increases in rates could damage the housing

market.

Gross mortgage lending by the societies fell from #3451m in August to

#3192m in September, and net new commitments dropped 2% to #2970m.

The association deliberately avoided over-reacting to the tentative

signs of a slowdown in lending. Instead, its director-general, Adrian

Coles, concentrated on the positive trend in lending in the third

quarter.

''Gross advances in September remained above #3000m for the fourth

successive month,'' he said.

''Although the figures show slight falls in net and gross advances

over the last two months, the lending market has remained relatively

stable over the summer,'' he added.

Gross and net lending in the third quarter were 10% and 15% higher

respectively than in the second. Compared with the same period last year

the gains were 16% and 32% respectively.

Current lending levels are similar to those in the same period of

1992, but Mr Coles argued that it was likely that the growth in

societies' lending represented a recovery in market share rather than in

the housing market itself.

''The rise in interest rates on September 12 does not appear to have

had a significant impact on lending in the month,'' he said.

''Net new commitments fell only slightly in September suggesting that

confidence had not been significantly harmed.

''The outlook for the rest of the year is for a cautious, yet

relatively stable market, though this could be damaged by any further

increases in interest rates.''

Higher interest rates do, however, seem to have boosted the amount of

new money flowing into the societies' coffers.

Net receipts totalled #322m last month after #91m in August. The flow

of funds into building societies has been picking up after a period in

the winter when there was a net outflow in five consecutive months.

Mr Coles said the September inflow was the largest since May and it

reflected seasonal factors as well as the increase in rates.

''The launch of new savings products may also have helped to boost

societies' inflow in spite of the competitive state of the savings

market and the aggressive action by National Savings after the rise in

interest rates.''

Neither the building society figures nor money supply data from the

Bank of England had any impact on financial markets. Much more

significant will be the Central Statistical Office's first stab at

estimating third-quarter gross domestic product this morning.

City economists expect growth in GDP to slow down from the second

quarter's heady rate of 1.1%, which played a significant part in the

decision to raise interest rates. The consensus forecast is growth of

0.7% in the third quarter, but the range is unusually wide, from 0.4% to

1.2%.

M4 lending to the private sector by the banks and building societies

increased by a seasonally-adjusted #3000m last month, after rises of

#1900m in August and #1200m in July.

Broad M4 lending grew by a seasonally-adjusted 0.4% in September,

taking the annual rate up from 4.7% in August to 4.8%, in the bottom

half of the 3% to 9% monitoring range. The recent trend is even weaker.

Over the latest three months the annualised growth rate was 3.4% and

over the latest six months 3.2%.

The M0 figures were revised upwards a decimal point. The growth rate

in September is now 1.1% and the annual rate 7.2%. But this was due to

revisions to the erratic figures for bankers' balances. Notes and coin

growth remained at 0.6% last month and 7% in the year to September.