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Building Societies Vs Banks - Battle of the Mortgage Deals


News provided by

moneysupermarket.com

08 Aug, 2012, 12:04 GMT

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CHESTER, England, August 8, 2012 /PRNewswire/ --

• Borrowers should always look beyond headline rates to find best the priced deal

• Overall, building societies offer lower cost mortgages vs banks

• Lower rates don't always mean the best deals - check the product fees as well as the interest rates

A comparison of mortgages offered by building societies versus banks shows that customers should not be blinded by headline rates on offer as high fees could mean paying more for borrowing than is necessary, according to research by MoneySupermarket.

Analysis by the UK's number one comparison site found when comparing the average two-year fixed rate mortgages from building societies and banks similar rates are on offer (4.15 per cent and 4.22 per cent respectively), but on closer inspection there is a big difference between the fees attached. Overall, building societies come out on top with much lower arrangement and booking fees which could help to save consumers over £700 over the term of the mortgage deal. It's a similar story with five-year fixed rate mortgages, although banks are offering a lower average interest rate at 4.62 per cent when taking into account the higher fees, consumers could be saving more than £200 if they went with a building society.

However, the banks trump the building societies when it comes to the cost of mortgages specifically for first time buyers. Set up costs are often a more important factor for first time buyers as they are likely to have less cash available to pay for the additional upfront fees. The difference between the top rate for a two-year fixed mortgage with a 90 per cent LTV from First Direct and Chelsea Building Society is 0.2 per cent but when the fees are factored in, there is an overall saving to be made of £1,000 by going with First Direct. This is more marked with five-year fixed rates where opting for NatWest's mortgage rather than that from Chelsea Building Society could result in a saving of £3,500 over the term of the deal.  

Clare Francis, mortgage expert at MoneySupermarket.com said: "When looking for a mortgage, don't just go to the big banks as there are some great deals available from smaller lenders too and it's really important to get the best product as it could literally mean the difference in cost of thousands of pounds.

"What's more, the deal with the lowest rate of interest won't necessarily work out to be the cheapest. This is because set up fees can have a significant impact on the overall cost of a mortgage and they vary considerably.

"It can work out cheaper to opt for a product with a higher rate in return for lower set up costs - it will depend on the size of the loan. Therefore when comparing mortgages you need to calculate the total amount you'll pay over the term of the deal - monthly repayments plus fees - in order to work out which will be the best value for you."

    
    Notes to Editors
    2 Year Fixed            
    Based on a £150,000 mortgage taken over 25 years on a repayment basis    
                               Building Societies      Banks    Difference
    Average Rate                        4.15%          4.22%       0.07%
    Average Arrangement Fee           £769.19      £1,060.67     £291.48
    Average Booking Fee               £230.40        £505.98     £275.58
    Average Total Fee                 £999.59      £1,566.65     £567.06
    Average LTV                           78%            74%         -4%
    True Cost Over Mortgage Term   £20,301.11     £21,008.81     £707.70
               
    5 Year Fixed            
    Based on a £150,000 mortgage taken over 25 years on a repayment basis    
                               Building Societies    Banks    Difference
    Average Rate                        4.68%          4.62%      -0.06%
    Average Arrangement Fee           £677.49        £931.50     £254.01
    Average Booking Fee               £208.07        £472.25     £264.18
    Average Total Fee                 £885.56      £1,403.75     £518.19
    Average LTV                           78%            76%         -2%
    True Cost Over Mortgage Term   £51,834.56     £52,043.75     £209.19
               
    Sourced by http://www.moneysupermarket.com 03.08.2012
   
   
    90% LTV
    2 Year Fixed                            
    Based on a £150,000 mortgage taken over 25 years on a repayment basis            
    Lender       Pay Rate Rate Type   Period  Max LTV  Arr/Bkg Fee    ERC     True Cost 
                                                                            over 2 Years
    First Direct   4.29%   Fixed     2 Years    90%     £999       2 Years   £20,582.28
    Yorkshire BS 
    (branch only)  4.79%   Fixed   30-Sep-14    90%     £495     30-Sep-14   £21,102.12
    Yorkshire BS 
    (branch only)  4.64%   Fixed   30-Sep-14    90%     £995     30-Sep-14   £21,292.04
    Chelsea BS 
    (branch only)  4.49%   Fixed   31-Aug-14    90%   £1,495     31-Aug-14   £21,484.60
    HSBC           4.99%   Fixed   30-Sep-14    90%     £599     30-Sep-14   £21,623.24
    Santander      5.99%   Fixed   02-Oct-14    90%     £495     02-Oct-14   £23,667.96
    Sourced by http://www.moneysupermarket.com 03.08.2012
               
                               
    5 Year Fixed                            
    Based on a £150,000 mortgage taken over 25 years on a repayment basis            
    Lender       Pay Rate Rate Type   Period  Max LTV  Arr/Bkg Fee    ERC     True Cost 
                                                                            over 5 Years
    NatWest 
    (first time 
    buyers only)   4.79%   Fixed   31-Oct-17    90%     None     31-Oct-17   £51,517.80
    HSBC           4.79%   Fixed   30-Nov-17    90%     £999     30-Nov-17   £52,516.80
    First Direct   4.99%   Fixed     5 Years    90%     None       5 Years   £52,560.60
    Nottingham BS  4.94%   Fixed   01-Aug-17    90%     £299     01-Aug-17   £52,598.00
    Yorkshire BS 
    (branch only)  4.94%   Fixed   30-Sep-17    90%     £995     30-Sep-17   £53,294.00
    Chelsea BS 
    (branch only)  5.19%   Fixed   31-Aug-17    90%   £1,495     31-Aug-17   £55,109.20

    Sourced by http://www.moneysupermarket.com 03.08.2012

           

MoneySupermarket.com compares (at 20th July 2012)

- 102 car insurance providers and 81 home insurance providers

- 11 broadband providers and 18 energy providers    

- 32 unsecured loan and 6 secured loan providers

- 60 mortgage lenders and 28 credit card providers

- 67 savings providers and 37 current account providers.

- Over 1,600,000 mobile phone deals

Our customers

We help our customers to save money on all of their household bills by providing a free, easy to use online service so they can compare a wide range of products in one place and find the product most suited to their needs. Our size means we are able to offer our customers exclusive, market-leading deals, including some they can't even get direct from providers.

Our providers

By having considerable volumes of informed customers actively looking for products and ready to purchase, we offer our providers an efficient and cost effective customer acquisition solution across all of our channels. This enables our providers to target their marketing spend in an effective and completely measurable way.

Our revenue comes predominantly from fees paid to us by product providers when a customer clicks through to their website and actually applies for or purchases a product. It is a success based marketing fee.

Our customer commitment

- We make it easy to find the brands you expect to see

- We strive to ensure a product cannot be found cheaper by going direct

- We let you remain in control of your personal data

- We are independent and impartial

- We make it easy to switch and save

- We strive to always show the most competitive product available

For further information please contact:
Paul Lawler
PR Manager Financial Services
+44(0)1244-370371
+44(0)787-237-9545
paul.lawler@moneysupermarket.com

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