According to Moneyfacts, despite record-low mortgage rates, banks are still failing to compete on cost, with the average two-year fixed rate at 75% loan-to-value (LTV) provided by building societies – a significant 0.58% lower than that offered by banks.
Findings published by Moneyfacts in June last year showed that mutuals were beating banks “hands down” in the battle to achieve the best mortgage rates on the market.
Currently, five out of the six two-year fixed rate mortgages in the best buy tables are offered by mutuals.
For customers borrowing with smaller deposits, building societies were also coming out top, Moneyfacts said. Borrowers opting for the average five-year fixed rate at 95% LTV, based on repayment of a £200,000 loan over 25 years, would find themselves £71.98 a month worse off if they were to opt for a deal from a bank instead of a building society.
Charlotte Nelson, finance expert at Moneyfacts.co.uk, said: “Building societies are making their mark on the mortgage market, leaving the banks behind in their wake.
“Putting customers first is what mutuals strive for, which is clearly reflected by the fact that borrowers are being offered much lower rates compared to their banking rivals. Building societies also have a lot more flexibility when it comes to their approach to underwriting, allowing them to opt for a more personal approach,” she added.
“The gap between the banks and building societies suggests that now is the time for borrowers to look away from the big banks and consider something closer to home for a more competitive and cost-effective deal.”