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Building societies are winning the mortgage rate war by offering cheaper deals than the banks, new research suggests.

Moneyfacts.co.uk compared their mortgage offerings and declared building societies the "undeniable winners".

It found that the average five-year fixed rate from a bank was 3.51%, against 3.21% for building societies.

That is 30 basis points lower, or nearly 10% cheaper.

Charlotte Nelson, finance expert at Moneyfacts, said it is the same story with two-year fixed rates. "The average rate from banks is 2.78%, but building societies once again trounce this with an average rate of 2.54%."

Nelson said the gap between building societies and the banks is actually getting wider. "This suggests that borrowers may need to look away from traditional banks to get the best deal."

Nelson added: "It is little wonder that building societies are doing so well as they are dominating the best buy charts. Indeed, several building society products are currently leading the market."

She said it was disappointing that despite all the money given to banks from the Government-backed Funding for Lending Scheme, and the price war between providers, that 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 borrowers looked closer to home to get the best mortgage deal."

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