A Moneyfacts report has found that high-loan-to-value (LTV) pricing for building societies is cheaper compared to the average for all lenders.
For instance, the average two-year fixed rate at 90% and 95% LTV for building societies stands at 5.76% and 6.03%. This compares to 6.2% and 6.15% for all lenders.
However, the report found that the average pricing of the seven biggest lenders was cheaper than building societies, at 5.48% for an average two-year fixed rate at 90% LTV and 5.87% at 95% LTV, but Moneyfacts said that the “lowest rates deals might not be the best on a true cost basis”.
The lenders include Barclays, Halifax, HSBC, Lloyds Bank, Natwest, RBS and Santander.
The report found that building societies’ average five-year fixed rates at 90% and 95% LTV are 5.18% and 5.47%, which is a decrease from the all-lender average of 5.67% and 5.66%.
It is up, however, compared to the average seven-lender pricing at 4.98% at 90% LTV and 5.42% at 95% LTV.
Moneyfacts continued on to say that building societies had wider product choice at higher LTVs than high-street lenders.
The total count of two-year fixed rates at 90% and 95% LTV stands at 49 and 35 for building societies, which is more than double the 17 and 16 for the top 17 lenders.
On the five-year fixed rate side, building societies had 42 products at 90% LTV, and 39 deals at 95% LTV, a rise from 30 and 17 from the seven high-street lenders.
Moneyfacts added that building societies had pioneered “innovative products and initiatives for buyers, like the track record mortgage from Skipton Building Society, the £5,000 deposit mortgage from Yorkshire Building Society and Leeds Building Society and Experian’s partnership to help customers boost their credit score.”
Building societies have ‘competitive packages’ for FTBs
Rachel Springall, finance expert of Moneyfactscompare.co.uk, said that building societies offer “competitive packages for first-time buyers and continue to support those who are the lifeblood of the mortgage market”.
She said that mutuals with two- and five-year fixed rates for first-time buyers with a 5% or 10% deposit currently charge less on average compared to the market average in the same space, but the biggest high-street banks offer some of the lowest fixed rates in the same sectors.
“High-street banks traditionally have more margin to price their mortgages lower, but the lowest rate deal may not be the best choice when all the costs and incentives associated with the mortgage are included. Saving money on the upfront cost of a mortgage is incredibly important for first-time buyers who may have exhausted their cash on a deposit, legal fees and moving costs,” Springall explained.
She continued on to say that the “key challenge” for first-time buyers is affordability, with interest rates higher than they may have expected this year and affordable housing remaining in short supply.
Springall pointed to recent research from the Building Societies Association (BSA), which found that becoming a first-time buyer is possibly the most expensive it has been over the last 70 years.
“The BSA found those without family help or on single and lower incomes have been excluded from homeownership. The ‘Bank of Mum and Dad’ could help aspiring homeowners, such as with a guarantor mortgage, but this may not be an option for everyone, so more innovation on mortgage lending would be widely welcomed by struggling buyers,” she added.
Springall noted that building societies had made notable innovations, but said regional differences were acting as barriers to prospective first-time buyers.
“Any borrower looking to get their foot on the property ladder would be wise to seek independent advice to ensure they find the right deal for them,” she said.
