Mortgages  

Building societies beat banks on mortgage rates

Building societies beat banks on mortgage rates

Building societies offer a better deal than banks when it comes to rates, according to figures from Moneyfacts.

The figures showed the average two-year fixed-rate from a building society is 2.27 per cent, 0.06 percentage points lower than the average offered by the main banks.

With five-year fixed-rates the difference is more pronounced, with the average building society rate at 2.59 per cent, 0.41 percentage points cheaper than banks.

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Charlotte Nelson, finance expert at Moneyfacts, said that with two-year rates being an extra-competitive area for lenders, the difference was smaller than with five-year rates, but still significant.

"Building societies are offering borrowers a better deal when it comes to rates. For example, the average five-year fixed-rate mortgage from a building society is a whopping 0.41 per cent lower than that of one offered by the main banks," she said.

She added that the difference was particularly marked when it comes to first-time buyer mortgages, where all of the places in the best-buy tables are taken by building societies. At 90 per cent loan to value, the difference between banks and building societies is 0.72 per cent.

David Hollingworth, of London & Country Mortgages said that although average gave a picture of the market, banks were just as capable as building societies in offering market leading rates.

"People aren’t just interested in whether it is a bank or a mutual, they want the right fit for them," he said. "Smaller building societies do deserve credit for the niche approach they often offer though - based on individual circumstances, and they have been innovative, particularly in the first-time buyer space."