Four of the top five cheapest lenders in 2002 were banks, according to an annual round up of mortgage costs. Financial products researchers, Defaqto, said that for standard variable rates, or their equivalent, Egg and HSBC were the top two lenders. Third to fifth places were taken by Nationwide, Intelligent Finance and Standard Life Bank.
The results were based on the amount of gross interest payable on a £50,000 interest only loan. Special deals or privilege rates were not allowed inclusion in the survey. There was a considerable difference in the amount of interest due at the extremes of the survey. Total interest costs for survey leader Egg were £2,370, compared with £3,036 more for last placed Abbey National, a difference of £666 (28%) more.
Mark Hayes-Newington, group commercial director at Defaqto, said: ‘The mortgage market continues to fragment in product terms and this applies to variable rate products as well, making direct cost comparisons more difficult. An unchanged base rate and increased competition were good news for mortgage payers in 2002, particularly those able to take advantage of the many deals on offer.’
He added: ‘In terms of cost, variable rate mortgages were significantly less expensive in 2002 than 2001, although the variability in cost between most and least expensive was as great as ever.’
However, Steve Smith, operations director at Hamptons International Mortgages, while agreeing that up to 25% of existing borrowers are on SVR, did not see the point of ranking lenders on this basis and did not think that it would be of help to the public.
He said: ‘A percentage of the country’s borrowers are on variable rates, but this is mainly because they do not realise that they are on it. As soon as they find out they should be speaking to somebody about a better rate away from SVR. We would never take out a standard SVR mortgage unless the client’s criteria insisted, but even then the lenders would generally offer a deal.’
l Defaqto is the data collection agent for the FSA’s comparative tables.