A small Stafford-based building society is prospering despite the credit crunch after refusing mortgages to anyone outside the area.

The Stafford Railway Building Society is making increased earnings on the market because of its surplus liquidity.

The 131-year-old society, based in Market Square, has been swamped by inquiries about its 5.99 per cent residential mortgage in the wake of the credit crunch.

It has now stopped offering mortgages outside the local area.

Chief executive Mike Heenan said the step had been taken to protect the 9,000 members of the society which is one of 61 remaining UK mutuals.

“We have had a considerable increase in the flow of applications for mortgages since the beginning of March.

“We are still lending in the local area, but we have had to put a brake on lending outside that.

“At the end of the day we have to balance what we get in savings with what we lend out,” he explained.

Mr Heenan said the priority was to protect local investors and borrowers.

“Restricting lending to the local area is not a sign of weakness. We have not withdrawn from offering mortgages and we have not put our competitive 5.99 per cent rate up.

He said that in fact the credit crunch had benefited the society.

“The earnings we can make on our surplus liquidity in the market are higher than we would traditionally expect. It has made us stronger.

“We have no sub-prime mortgages and at the moment no wholesale funding so we have not got caught up in the problems other lenders have got involved in,” he said.

For the past four years the society has won the What Mortgage Awards Lender of the Year award, outperforming more than 100 other lenders, including First Direct, Egg and Halifax, to take the overall number one spot.