Building Societies are beating the banks “hands-down” when it comes to mortgage rates, new research has revealed.
According to Moneyfacts.co.uk, building societies are on average offering better mortgage deals than the banks. This is despite bigger banks taking greater advantage of the government’s Funding for Lending Scheme to fund their mortgage books.
The interest rate for a two-year fixed rate mortgage with a 95% loan-to-value is on average 0.26% lower at a building society at 4%, while at two-year fix with a 75% loan-to-value is 0.44% lower at 1.98%.
The average five-year fixed rate at 95% loan-to-value provided by building societies is a massive 0.50% lower than that offered by banks.
Charlotte Nelson, finance expert at Moneyfacts.co.uk, said now is the time for borrowers to look away from the big banks and consider smaller mutuals for a “more competitive and cost-effective deal”.
“Banks are still failing to compete on cost. For example, borrowers opting for the average two-year fixed rate at 75% loan-to-value 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.
“Mutuals are designed to put customers first and aim to provide better deals for their customers. This is reflected by the fact that borrowers are being offered much lower rates by building societies compared to their banking rivals. They can also have a much more personal approach in terms of lending criteria.
“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 smaller mutuals for a more competitive and cost-effective deal.”
With lenders slashing rates, experts believe there has never been a better time to get a mortgage.
HSBC has launched a new fixed rate mortgage with an interest rate below 1%, as competition between lenders heats up.
The two-year fixed rate mortgage has an interest rate of 0.99%, the lowest since records began.
Nationwide has cut its fixed rate and tracker mortgages by up to 0.25%, while Halifax has reduced its rates on its first-time buyer mortgage range by 0.30%.
Newcastle Intermediaries has also launched a new two-year fixed rate mortgage for re-mortgaging customers at an interest rate of 1.99%.
The Bank of England said last week it was keeping interest rates at the record low of 0.5%, where they have been since 2009.
The Bank suggested it could cut the base rate in the coming months, especially if Britain decides to leave the EU.
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