Banks vs building societies: which have the best mortgages?
Move over banks, mutuals offer borrowers better deals, according to new research.
Building societies are the clear winners when it comes to low rate mortgage deals, dominating the best buy tables, according to research from Moneyfacts.co.uk.
This is despite bigger banks taking greater advantage of the Government’s Funding for Lending Scheme to fund their mortgage books, and therefore many would assume that mortgage rates from these providers would be significantly lower than those offered by the rest of the market. According to Moneyfacts, that’s not the case.
It said that the average two-year fixed rate on offer for borrowers with a 5% deposit is 4.26% from banks and just 4% from building societies.
Borrowers with 25% upfront can access average two-year fixed rates of 2.42% from banks, while building societies offer a lower average 1.98%.
And for those with a significant 40% deposit or equity, banks offer an average two-year fixed rate of 2.05% while building societies beat that with an average 1.19%.
Moneyfacts also examined five-year fixed rates and found the same results – banks’ mortgage rates were more expensive on average than those from building societies.
Charlotte Nelson, finance expert at Moneyfacts.co.uk, said: “Building societies currently dominate the best buy tables and are beating the banks hands-down in the mortgage rate war, which is disappointing considering the amount of Government help bigger banks have received. Despite all the money released by the Funding for Lending Scheme, banks are still failing to compete on cost.
“For example, borrowers opting for the average two-year fixed rate at 75% loan-to-value (LTV) would be £521.28 worse off in terms of repayments in the first year if they opted for a bank deal instead of a mortgage from a building society.
“Building societies are making their mark on the mortgage market by offering the lowest deals.”