The UK's Cheapest Mortgages

Is your mortgage lender a winner or a sinner? Find out as we review the year's good, bad and ugly home loans.

According to new research, British banks beat building societies to be the cheapest mortgage lenders in 2005.This morning, leading independent financial researcher Defaqto released its annual survey of standard variable rate (SVR) mortgages. The SVR is the bog-standard interest rate paid by all borrowers who aren't on a special-rate deal, and is usually a mortgage lender's highest rate. Although most mortgage borrowers aren't paying their lender's standard variable rate, SVRs are an important benchmark in ranking lender competitiveness.According to Defaqto, banks head the table of cheapest lenders yet again, with high-street giant HSBC taking the top spot and online bank Intelligent Finance claiming second place. However, three building societies are hot on their tail, with Nationwide BS, Skipton BS and Britannia BS filling the next slots.Defaqto's survey compared the amount of interest paid during 2005 on an £50,000 interest-only mortgage; the table below lists the results for the UK's largest lenders (specialist providers are excluded, as are any privilege or loyalty rates).As you can see, in 2005, a blissful borrower with a £50,000 HSBC mortgage would have paid £574 less than a cranky customer of the Bank of Scotland, which comes to a handsome saving of almost £48 a month. Also, it's worth noting that the very biggest mortgage lenders charge extremely similar rates. Indeed, with the honourable exception of HSBC and Nationwide BS, the really big players are all in the lower half of the table. Alas, when it comes to mortgage lenders, big is rarely beautiful!Standard variable rates in 2005LenderInterestpaid (£)Differencefrom HSBC (£)HSBC2,834n/aIntelligent Finance2,936102Nationwide BS2,978144Skipton BS3,012178Britannia BS3,133299Co-operative Bank3,137303Direct Line3,148314Standard Life Bank3,158324The One Account3,183349Yorkshire BS3,265431Principality BS3,303469Leeds BS3,326492Chelsea BSGMAC-RFC3,328494Portman BS3,330496AbbeyCapital Home LoansCheltenham & GloucesterHalifax3,333499West Bromwich (1)3,353519Royal Bank ofScotland / NatWest3,357523Coventry BS (2)Woolwich3,362528Alliance & LeicesterBristol & WestNorthern Rock (3)Yorkshire Bank3,378544Bank of Scotland3,408574(1) For borrowers of 5+ years' standing, this figure is £3,028.(2) For borrowers of 61+ months' standing: £3,223.(3) For borrowers of 7+ years' standing: £3,253.Overall, the cost of servicing an SVR mortgage was around five percent higher in 2005 than it was in 2004, thanks to the Bank of England's base rate being higher, on average, over the past year.So, if your mortgage lender is languishing in the lower levels of this table, your home loan may be far from being a Best Buy. Hence, If you can move your mortgage without paying a whopping penalty, I suggest that you make 2006 your personal Year of the Remortgage!More: Start searching for a happier home loan in our Mortgage centre | Ten Ways To Be A Smarter Homeowner!Cliff owns shares in HBOS, parent company of the Halifax and Bank of Scotland.