Where To Find The Best Deals

Forget the gimmicks and stereotypes. We tell you how banks and building societies compare when it comes down to rates alone.

This article was first sent to Fools as part of our Afternoon email campaign.

Last week, I examined the fundamental differences between banks and building societies, looking at both models in terms of how they run their businesses, together with how each has been affected by the credit crunch.

But when it comes to day-to-day banking, you're probably also interested in customer service, together with the rates and returns you'll get when you borrow or invest.

Obviously customer service is another very important factor - but it's also a very personal one. And though by and large my own experiences have proved more-or-less even whether dealing with a bank or building society, I'd be very interested to hear fellow Fools' opinions via the comments at the bottom of this article.

However, a more concrete measure of the two can be made by comparing the interest rates offered by both banks and building societies.

So, let's start off by taking a look at some good old instant access savings accounts. 

Savings

Here are the top five easy access savings accounts provided by the banks:

And here's how the building societies square up against them:

As you can see from the tables, banks offer slightly better rates on instant access accounts, with rates of the top five accounts averaging a return of 6.38%, while the top five building society accounts average 5.98%.

There's not much to choose between the banks, with both Tesco and Capital One offering 6.5% AER on balances from £1 and £500 respectively. The best savings account from a building society comes from Nottingham building society, which also pays 6.5% on its Sleep Easy Saver Account.

If safety is one of your primary concerns, Nottingham BS actually makes a point of highlighting how robust it is, declaring on its website that it has never invested money in Iceland or bought a mortgage book from someone else. To find out more about this account and Nottingham BS, read Jane Baker's excellent analysis here.

However, although this is not reflected in the tables, I find banks tend to fall behind when it comes to maintaining the juicy rates that launch them into the best buy tables.

This observation is endorsed by Moneyfacts research, which found that the top six consistent no-notice accounts over three years are all provided by building societies.

Based on interest earned on £10,000 over three years, Beverley BS Postal Account is top dog, currently paying 5% on balances above £5,000. Teachers BS's Call Save account sits in second place, followed by third placed Chesham BS's Save Direct 2^nd Issue.

In addition, long time Fool favourite Nationwide has the second most consistent internet account over three years, with only Sainsbury's Internet Saver able to beat it it. So, if it's consistency you're after, I would say building societies definitely rule the roost.

Mulling over your mortgage

So, that's savings, but what about mortgages? Obviously, when it comes to getting a mortgage, the best deal for you will depend on your individual circumstances, so it's important to shop around. However, using eMoneyfacts I trawled the market, and discovered some clear trends.

First of all, Nationwide has the lowest Standard Variable Rate on the market, at just 4.69%. This means Nationwide borrowers - even those in negative equity - will be able to access this rate once their current deal finishes. 

Similarly, if you are a first time buyer with a smaller deposit, requiring a mortgage of 90% loan to value (LTV), on measure, building societies offer the better rates.

For example,  the best 90% LTV deal I found was offered by Britannia building society. Its standard variable rate of 6.3% for the life of the mortgage is available to borrowers with a 10% deposit. Considering the Bank of England base rate currently stands at 3%, this is pretty uncompetitive by `best deal' standards. But with lenders still tightening their belts, I feel that those with smaller deposits will continue to be squeezed for the considerable future.

If you are lucky enough to have a bigger deposit or a large amount of equity in your home, you could pick up a great deal from banks too. For example, if you only need to borrow 60% of the value of the home, the best deal comes from HSBC, which offers a tracker rate of 0.99% above the base rate. So at the moment, your rate would be just 3.99%.

There are no early repayment charges and the fee is a reasonable £799.

If you don't qualify for this rate, the best advice I can give you is to consider advice from a mortgage broker, which will search the whole of market to find you a mortgage tailored to your individual circumstances.

That way, whether it's a bank or building society you sign on the dotted line with, you'll always be getting the best rate. After all, what's in a name, when it's the numbers that ultimately do the talking...

More: Banks vs. Building Societies: Which Is Safer? / Find Out How Safe Your Bank Is