New research has found that if you're looking for a new mortgage, a building society could be the place to go. More than three in four ‘best buy' mortgage rates are now offered by mutuals and it is small societies and not High Street banks that are dominating the mortgage market.
We look at the current best buy tables and why a mutual may offer the best deal on your next mortgage.
Building societies adding value but may not be suitable for everyone
Analysis by Castle Trust, a company that offers equity stakes to homebuyers, has found that building societies offer the majority of ‘best buy' deals. The Financial Times reports that "as many as 33 of the 40 best-buy deals across fixed, variable and buy-to-let deals are provided by building societies."
The FT also reports recent figures which show that gross mortgage lending by mutuals was up 25% in January, compared to a year ago. This has seen building societies' share of lending rise to 21%, up from 12.9% in 2009.
"Over recent months it has been the building societies that are competing most strongly for new mortgage business," says Keith Osborne, editor of whathouse.co.uk. "For example, the Yorkshire Building Society has recently launched the lowest five-year fixed-rate deal in UK history while the Chelsea Building Society offers the cheapest two-year fixed deal."
The Financial Times reports that the West Bromwich Building Society and Chelsea also offer the best-buy two-year fixes for loan-to-values of 80% and 90% respectively. Building societies also offer the cheapest rates for two-year trackers across most loan-to-values, with the exception of the 60% deal offered by HSBC at 1.75%.
"As well as offering market leading rates, building societies can often agree quirkier cases or loans to people with non-standard underwriting," adds Osborne. "They often employ experienced underwriters who can assess a case on its merits and many have niche, specialist areas which are really helping clients who don't fit the main banks'‘tick-box' mentality."
However, while building societies continue to offer many of the lowest rates, they won't be suitable for all borrowers. For example, some smaller regional mutuals have geographical restrictions and will only lend to borrowers in certain postcode areas. Others restrict their lending to lower loan-to-values or have a lower maximum loan limit.
"If you are looking for a larger loan then you may have to approach a bank such as Barclays or Santander or, alternatively, a private bank," concludes Mr Osborne.
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