Want the best mortgage deal? Head to a building society
If you're looking for the best deal on a new mortgage it could pay to avoid the big name banks and head to a building society. That's the result of new research that has found that mutuals are undercutting banks when it comes to the cost of a new home loan.
The news comes as Bank of England data reveals that the average cost of a mortgage has fallen to the lowest levels since records began.
Building society fixed rates now 0.3% cheaper than banks
New research from the financial data analysts Moneyfacts has revealed that building societies are outstripping banks when it comes to offering the cheapest mortgage rates.
The average five-year fixed rate offered by building societies is now 3.21%, 0.3% cheaper than the average deal offered by banks (3.51%). For two-year fixed rates, the average rate on offer from banks is 2.78% while the average from mutuals is 2.54% - a saving of almost a quarter of 1%.
Moneyfacts also found that building societies have five products in both the ten lowest-rate two-year fixes and ten lowest-rate five-year fixes.
Spokeswoman Charlotte Nelson says: “Not only do building societies come out on top when it comes to rates but the gap between their offers and those from banks is getting wider, suggesting that borrowers may need to look away from traditional banks to get the best deal. It is disappointing that, despite all the money given to banks from the government-backed Funding for Lending Scheme and the ever-growing price war between providers, banks are still failing to compete on the overall cost.
“Now that local building societies are offering a genuine alternative to banks, perhaps it is time for borrowers to look closer to home to get the best mortgage deal.”
Mortgage rates hit their lowest level since records began
While building societies are offering some of the lowest rates around, borrowers are currently enjoying the best deals since records began. The latest Bank of England Mortgage Lenders and Administrators Return (MLAR) report has revealed that the average rate on mortgage lending has fallen to 3.01%, the lowest since the series began in 2007.
The report found that the average fixed mortgage rate has fallen almost a quarter of one percentage point to 3.13%, while variable mortgage rates have dropped 0.16% to 2.58%.
The BOE figures support findings from Moneyfacts who have reported that the average two-year fixed rate has fallen for nine consecutive months to stand at a new record low of 2.87%. The analysts report that the average rate on a two-year tracker mortgage has also fallen, to 2.02%.
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