A survey shows that when it comes to mortgage lenders, big is rarely beautiful. Often, smaller lenders provide much better deals, so it pays to shop around.
If your home loan is with one of the UK's large mortgage lenders, you've probably missed out on a better deal.
Although homebuyers and homeowners assume that big is beautiful when it comes to choosing a mortgage lender, this is rarely the case. In fact, according to Moneyfacts, borrowing from a large or well-known lender can mean getting a bad deal. The financial researcher has provided two examples to show how smaller lenders can be giant killers:
| Lender | Interest rate
(%) | Upfront fee
(£) | League
table
rank | Assets
(£bn)
|
|---|
| 5-year fixed | | | | |
| Chorley & District BS | 4.30 | 595 | 50th | 0.1 |
| Bank of Scotland (HBOS) | 4.74 | 599 | 1st | 68 |
| 5-year discount | | | | |
| National Counties BS | 4.40 | 395 | 23rd | 0.8 |
| Abbey | 4.79 | 499 | 3rd | 25 |
So, in the above cases, the small building societies charge lower rates and smaller arrangement fees than the big boys do. Although you'd expect large companies to pass on their cost savings through, for example, lower arrangement fees, this doesn't appear to be the case. Indeed, in the above example, Bank of Scotland charged the highest arrangement fee, and eighteen smaller lenders offered both lower rates and smaller fees.
As ever, the golden rule of borrowing is simply shop around and don't be lured by the big players' huge advertising budgets. Instead, visit a reputable no-fee mortgage broker, such as the award-winning London & Country Mortgages, or one of several web-based search wizards to track down the perfect home loan to suit you.
In summary, it's clear that many big mortgage lenders don't pass on the benefits of their corporate size and efficiency to their customers. In fact, as a shareholder in two banks*, I suspect that a fair chunk of this extra wealth ends up in my pocket!
More: Find a happier home loan in our marvellous Mortgage centre
* Cliff owns shares in HBOS, the parent company of the Halifax and Bank of Scotland, and Lloyds TSB.
