Banks and building societies battle for cheapest mortgages

While a bank was the cheapest mortgage lender in 2007 for existing borrowers in Defaqto’s annual survey, building societies took two of the top five places and five of the top ten.

In its survey, Defaqto found that for standard variable rate mortgages or their equivalent for existing borrowers, HSBC retained its top spot as the cheapest mortgage, closely followed by two building societies, Skipton Building Society and then Nationwide.

The research was based on the amount of gross interest payable on a £50,000 interest-only mortgage provided by top lenders in 2006, as defined by the Council of Mortgage Lenders. In order to provide a level playing field for comparisons, specialist providers were not included, neither are any privilege or loyalty rates.

Borrowers with HSBC paid £3361.99 in 2007 for their mortgage, which was £532.39 cheaper than the most expensive deal.

Commenting on the results, David Black, Principal Consultant – Banking at Defaqto said, “In 2007 there were three increases in Bank Base rates and one decrease so it is not surprising that the average cost of servicing a standard variable rate mortgage for the largest lenders rose last year by 14% over the cost in 2006. While it is acknowledged that standard variable rate mortgages are only one type of mortgage, their importance may be increasing due to the knock-on effects of the credit crunch, making it more difficult to obtain attractive alternative deals.”