Building societies rank high for cheap mortgages

ALTHOUGH a bank, HSBC, was the cheapest mortgage lender in 2007 for existing borrowers, building societies took two of the top five places and five of the top ten.
In its annual survey, Defaqto, an independent financial data collection and research company, found that for standard variable rate (SVR) mortgages or their equivalent for existing borrowers, HSBC retained its top spot as the cheapest mortgage, closely followed by two building societies, Skipton and Nationwide.

Scottish banks did not fare well – Bank of Scotland was named as most expensive, followed by the Royal Bank of Scotland and the Clydesdale Bank.

The research was based on the amount of gross interest payable on a £50,000 interest-only mortgage provided by top lenders in 2006, as defined by the Council of Mortgage Lenders (CML). In order to provide a level playing field for comparisons, specialist providers were not included, and neither were any privilege or loyalty rates.

Borrowers with HSBC paid £3,361.99 in 2007 for their mortgage, which was £532.39 cheaper than the most expensive
deal.

David Black, principal banking consultant at Defaqto, said: "In 2007 there were three increases in the Bank base rate and one decrease so it is not surprising that the average cost of servicing a standard variable rate mortgage for the largest lenders rose last year by 14 per cent over the cost in 2006.

"While it is acknowledged that standard variable rate mortgages are only one type of mortgage, their importance may be increasing due to the knock-on effects of the credit crunch, making it more difficult to obtain attractive alternative deals."

Given the availability of competitive mortgage deals is expected to reduce further, people would be advised to shop around as soon as possible.

Bob Pannell, CML head of research, said: "Borrowers should make a New Year resolution to review their finances and plan ahead if they are coming off fixed rate deals later this year."


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Mortgage approvals hit new low

The number of mortgages approved for people moving home fell to a three-year low during November, figures showed.

Just 83,000 new home loans were approved for people buying a property during the month, the lowest figure since January 2005, according to the Bank of England.

The latest slump follows on from a subdued month during October, when only 89,000 new mortgages were approved for house purchase, itself the lowest figure since February 2005.

It is the fifth month in a row that mortgage approvals for house purchase have fallen, adding to mounting evidence that the housing market has finally run out of steam.

Nationwide Building Society said last week that house prices fell by 0.5% during December, while Britain's biggest mortgage lender Halifax has reported price falls in each of the three months to the end of November.

The Bank of England said on Friday that there was a slight month-on-month increase in the number of loans approved for people remortgaging during November at 95,000, but this was still below the recent monthly average of 99,000.

This helped to push up the value of all mortgages approved to £25.67 billion, marginally above the £25.66 billion recorded in October, which was the lowest figure since July 2005.

Banks and building societies advanced a total of £28.45 billion in November, the lowest figure since September 2006, Friday's figures showed.

But net lending, which strips out redemptions and repayments, rose slightly compared with the previous month to £7.78 billion, although this was still well below the recent six-month average of £8.8 billion.

The data comes the day after the Bank warned consumers are likely to face higher mortgage costs, while the availability of home loans is set to fall as a result of the global credit crunch.

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