Banks v building societies

Banks have taken over the mantle from the building societies by offering the most competitive overall deals on both savings and mortgages.

The building societies had offered the best range of products when it came to savings, but it appears that their members have been harder hit than bank customers by the recent cuts in base rate.

While they no longer offer the best overall range of savings products, the building societies do offer the majority of best buy deals, taking 60% of the places in the Moneyfacts best buys.

Michelle Slade, analyst at Moneyfacts.co.uk, comments: "The banks have come in for plenty of criticism in the last 18 months, but overall they are offering the best deals to their customers.

"Banks are not known for offering best buy savings deals, but they now dominate them for fixed rate bond and cash ISAs. It appears they have upped their game in an attempt to maintain existing savers as well as attracting new customers.

"As a result of having diverse income streams, the banks have been able to pass on more of the base rate reduction to their customers through lower mortgage rates. Despite it being a sluggish mortgage market the main high street banks want to be seen as offering the most competitive deals.

"Building societies receive the majority of funding for mortgages from their savings book. They compete on a much smaller scale in the mortgage arena as they are unable to write off such large debts, resulting in them taking a larger margin for risk.

"Despite no building society failing, they have been lumbered with the expense of contributing to the Financial Services Compensation pool. In response building societies will have had no alternative but to factor this into their pricing."