Building societies are “leaving the banks behind in their wake” when it comes to the best mortgage rates, new research shows.
Despite record low rates, banks are failing to keep up with building societies when it comes to the best mortgage deals.
According to Moneyfacts.co.uk, the average two-year fixed mortgage with a 25% deposit is 0.58% lower with a building society.
For those taking out a five-year fix there is even better news – borrowers with a 25% deposit are paying on average 0.66% less per month with a building society than they would do with a bank.
Charlotte Nelson, finance expert at Moneyfacts.co.uk, said: “Building societies are making their mark on the mortgage market, leaving the banks behind in their wake. It seems that despite mortgage rates falling to record lows, banks are still failing to compete on cost. In fact, the average two-year fixed rate at 75% loan-to-value (LTV) provided by building societies is a massive 0.58% lower than that offered by banks.
“The domination of building societies is clear to see when you cast your eye over the Best Buy tables, with five out of the six two-year fixed rate mortgage Best Buys being offered by mutuals. More importantly, the lowest deals aren’t just reserved for those with larger deposits. Building societies are hitting it out of the park for those with smaller deposits too. For example, borrowers opting for the average five-year fixed rate 95% LTV would find themselves £71.98 a month worse off if they were to choose a mortgage from a bank instead of a building society.
“Putting customers first is what mutuals strive for, which is clearly reflected by the fact that borrowers are being offered much lower rates compared to their banking rivals. Building societies also have a lot more flexibility when it comes to their approach to underwriting, allowing them to opt for a more personal approach.
“The gap between the banks and building societies suggests that now is the time for borrowers to look away from the big banks and consider something closer to home for a more competitive and cost-effective deal.”
| Two-year fixed rate | Banks | Building societies | Difference |
| 95% LTV average | 4.11% | 3.71% | 0.40% |
| 75% LTV average | 2.32% | 1.74% | 0.58% |
| 60% LTV average | 1.92% | 1.67% | 0.25% |
| Five-year fixed rate | Banks | Building societies | Difference |
| 95% LTV average | 4.65% | 4.01% | 0.64% |
| 75% LTV average | 3.00% | 2.34% | 0.66% |
| 60% LTV average | 2.51% | 2.24% | 0.27% |
| Source: Moneyfacts.co.uk | Compiled: 23.1.17 | ||
