The best mortgages are found off the high street!

If you want a market leader, you'll need to look beyond the big names.

Buying a house is the biggest debt most of us will ever take on. As a result, it’s no surprise that many of us turn to a handful of familiar lenders when the time comes to arrange the finance for the deal. After all, they have a reputation, a level of trust. You may have banked with them in the past, so feel you know what to expect.

However, according to some new research, going with the tried and tested names when snapping up a mortgage could end up costing you in the pocket.

The biggest lenders

Moneyfacts looked at a variety of different terms and forms of mortgage, available to borrowers with deposits of either 15% or 25%, and worked out how many of the best deals came from the UK’s largest lenders. These are the lenders they classed as the UK’s largest:

  • Halifax
  • Cheltenham & Gloucester
  • Lloyds TSB
  • Santander
  • Alliance & Leicester
  • Abbey for Intermediaries
  • Nationwide BS
  • Woolwich
  • Royal Bank of Scotland
  • NatWest
  • Northern Rock
  • HSBC
  • First Direct

Here’s what they found:

Borrower type

Mortgage type

Loan-to-value

% of top 50 deals from largest lenders

House purchase

Two-year fix

75%

26%

Remortgage

Two-year fix

75%

38%

House purchase

Five-year fix

75%

32%

Remortgage

Five-year fix

75%

28%

House purchase

Two-year fix

85%

12%

Remortgage

Two-year fix

85%

18%

House purchase

Five-year fix

85%

24%

Remortgage

Five-year fix

85%

20%

House purchase

Two-year tracker

75%

48%

Remortgage

Two-year tracker

75%

44%

Going with the little guy

So why are the bigger lenders not dominating the best buy tables? There are a number of reasons, in my view.

Firstly, many of them got their fingers badly burned during the credit crunch, and so have preferred to spend the time since focusing on the safest areas of the market, only lending to borrowers with deposits of 40% for example. For quite a while, this was the most hotly competitive area of the mortgage market, an idea that would have seemed bizarre just a few years ago.

Related blog post

Then there is the question of funding – larger lenders will still utilise the money markets to get the cash for their deals, particularly fixed rates, as I explained in Fixed mortgages reach highest rates in six-months. However, smaller lenders tend to rely on their own deposits when setting rates, so are not at the mercy of the money markets and can be a little more competitive.

However, there is also a question of scale. If Halifax, for example, comes forward with an amazing five-year fixed rate at 90%, there’s a pretty good chance they will be swamped with applications very quickly, as more borrowers will be aware of the deal. As a result, the bigger lenders prefer to offer solid, rather than market-leading, deals.

That’s not always the case with smaller lenders. If Teachers Building Society launches a great five-year deal, unless you were really on the ball in keeping up to date with new mortgages, chances are you may never hear about the deal.

Smaller lenders are less cumbersome than the bigger guys, able to move quickly when they spot an opportunity, but they are also just as quick to withdraw the deals once they feel they have lent enough.

The importance of brokers

John Fitzsimons looks at how you can save money by selling your home yourself online

To me, this just emphasises how important it is to use a decent broker. It’s hard enough to keep track of the best deals from the biggest lenders in the market, let alone those on offer from tiny lenders that you may never have heard of!

What’s more, brokers are best placed to know how long a mortgage is likely to last. After all, when market-leading deals are launched by small building societies, chances are it won’t be around for long!

We have our own fee-free mortgage team on hand to provide you with completely independent mortgage advice, whether over the phone, by email or via instant messenger. Just head over to our mortgage centre, where you can also search the market for yourself if you prefer to go alone.

The tables below show some of the best deals around from smaller lenders, with a few crackers from the big guys for reference. Remember that the mortgage world moves quickly, so some of these deals may not be around for long.

15 tremendous trackers

Lender

Term

Interest rate

Maximum loan-to-value

Fee

First Direct

Two-year tracker

1.99% (base rate + 1.49%)

65%

£999

HSBC

Two-year discount

1.99% (lender’s SVR – 1.95%)

60%

£999

The Mortgage Works

Two-year stepped tracker

2.44% (base rate + 1.94%) for first year, then base rate  + 2.94% for second year

75%

£595

Market Harborough

Two-year tracker

2.48% (base rate + 1.98%)

75%

£945

Nationwide

Two-year tracker

2.49% (base rate + 1.99%)

70%

£900

Norwich & Peterborough

Two-year discount

2.59% (lender’s SVR – 2.76%)

85%

£995

Market Harborough

Two-year tracker

2.75% (base rate + 2.25%)

80%

£995

Skipton BS

Two-year tracker

3.08% (base rate + 2.58%)

80%

£995

Yorkshire BS

Two-year tracker

3.49% (tracks base rate + 2.99%)

85%

£995

HSBC

Term tracker

2.29% (base rate + 1.79%)

60%

£99

Bank of China

Term tracker

2.50% (base rate + 2%)

70%

1% of advance

Saffron BS

Term tracker

2.98% (base rate + 2.48%)

75%

£999

Coventry BS

Term tracker

2.99% (base rate +2.49%)

65%

£199

Market Harborough

Term tracker

3.45% (base rate + 2.95%)

80%

£495

HSBC

Term tracker

4.29% (tracks base rate + 3.79%)

90%

£99

15 fantastic fixed rates

Lender

Term

Interest rate

Maximum loan-to-value

Fee

Halifax

Two-year fixed

3.19%

75%

£1,495

Skipton BS

Two-year fixed

3.49%

70%

£1,190

Loughborough BS

Two-year fixed

3.55%

80%

£499

Norwich & Peterborough BS

Two-year fixed

4.18%

85%

£995

Leek United

Three-year fixed

3.75%

75%

£995

Loughborough BS

Three-year fixed

3.95%

80%

£575

Shepshed BS

Three-year fixed

3.99%

80%

£150

Post Office

Three-year fixed

4.59%

80%

£0

Platform

Four-year fixed

4.69%

75%

£1,495

Principality BS

Four-year fixed

4.89%

75%

£0

Principality BS

Four-year fixed

5.39%

85%

£999

Loughborough BS

Five-year fixed

4.49%

75%

£549

National Counties BS

Five-year fixed

4.69%

80%

£895

Nottingham BS

Five-year fixed

5.19%

85%

£995

Post Office

Five-year fixed

5.79%

85%

£0

More: Find a competitive mortgage | Get ready for mortgage rate rises | The time is ripe for buy-to-let

Use lovemoney.com's innovative new mortgage tool now to find the best mortgage for you online.

At lovemoney.com, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free lovemoney.com broker. Call 0800 804 8045 or email mortgages@lovemoney.com for more help.

This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at lovemoney.com), before acting on anything contained in this article. 

Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term may revert to the lender's standard variable rate or a tracker rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.

Your home or property may be repossessed if you do not keep up repayments on your mortgage.

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