According to an article in Propertywire, UK building societies are offering better rates on mortgage deals than banks. The research from MoneySupermarket, shows that low rates don’t necessarily indicate the very best deals, and it’s well worth checking not only the interest rates but also the fees.
They compared a range of mortgages from both banks and building societies and found people could be paying more than they need. A typical example was a two-year fixed rate mortgage which is offered at a similar rate from both banks and building societies at 4.22% and 4.15% respectively. At first glance there seems little difference between the two until you take a closer look at the fees. Building societies tend to have much lower arrangement and booking fees, and could save the borrower an average of £700 over the total term of the mortgage deal. It’s a similar situation with five-year fixed mortgages, as even though the banks offer a slightly lower interest rate, their fees to make up the difference. On average consumers could save more than £200 by choosing to borrow from a building society.
However if you’re a first-time buyer then it’s worth choosing a bank that offers products specifically designed for this sector. Savings for a two-year 90% loan to value fixed rate mortgage can be as much as £1,000, while savings on a five-year fixed rate could be more than £3,000 over the term of the deal.
Experts at Money Supermarket are advising people to look at deals offered by smaller lenders as well as the big banks. They point out the savings could add up to thousands of pounds, especially when the setup fees are taken into account. Borrowers should calculate the total amount they’ll pay over the term of the deal, including the fees before deciding on a particular product.