Want to bag yourself a cheap mortgage deal?

Head to a building society, as figures out today from Moneyfacts reveal the mutual sector is offering the lowest mortgage rates on the market.

The financial information provider said that building societies are the winners when it comes to the mortgage rate war, despite many banks claiming to have launched deals at their lowest ever rates.

Mutual appreciation

The difference in rates between banks and building societies is clear across a range of mortgage products.

For example, for those with a small 5% deposit, the average two-year fix on offer from banks is 4.11% compared to just 3.71% from building societies. Five-year fixes are 4.65% from banks and 4.01% from building societies.

The difference is even bigger for borrowers with a typical 25% deposit or equity level. In this category two-year fixes average 2.32% from banks and 1.74% from building societies. Five-year deals come in at 3% and 2.34% respectively.

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. It seems that despite mortgage rates falling to record lows, banks are still failing to compete on cost. In fact, the average two-year fixed rate at 75% loan-to-value (LTV) provided by building societies is a massive 0.58% lower than that offered by banks.”

What about large deposits?

Even those with a large deposit or big chunk of equity would be better off with a building society, according to the figures from Moneyfacts.

Average two-year fixes for borrowers with a 40% deposit are 1.92% from banks and 1.67% from mutuals. Five-year fixes are 2.51% and 2.24% respectively.

Nelson added: “The domination of building societies is clear to see when you cast your eye over the Best Buy tables, with five out of the six two-year fixed rate mortgage Best Buys being offered by mutuals. More importantly, the lowest deals aren’t just reserved for those with larger deposits; building societies are hitting it out of the park for those with smaller deposits too.

“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.”