Building societies winning the mortgage battle | will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by will always be from Be Scamsmart.

ARCHIVED ARTICLE This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.


Lieke Braadbaart

Online Writer
Published: 05/02/2018

A battle has been raging for some time now between the big banks and building societies – a battle for borrowers' business. Today's figures show not only that this competition remains active despite the Bank of England's recent base rate increase, but that the building societies appear to be winning.

Mortgage rate war finance expert Charlotte Nelson has found that "Building societies are offering borrowers a better deal when it comes to rates. For example, the average five-year fixed rate mortgage from a building society is a whopping 0.41% lower than that of one offered by the main banks."

While the difference in the two-year market is not as great, building societies are still offering a rate that is 0.06% lower on average. For reference, the main banks mentioned in the table below are Barclays Mortgage, Halifax, HSBC, Lloyds Bank, NatWest, Royal Bank of Scotland, Santander and TSB.

Average Rate Main Banks Building Societies Difference
Two-Year Fixed 2.33% 2.27% 0.06%
Five-Year Fixed 3.00% 2.59% 0.41%


Charlotte explains the reason for the smaller change: "Borrowers have traditionally looked to the short-term to keep their options open if anything changes, and the main banks do all they can to remain competitive in this key area." Given the large rate gap in the five-year market, it appears that building societies are looking to differentiate their product range by offering appealing rates over five-year terms as well as shorter timescales.

First-time buyers are the big winners

It's not just borrowers with large deposits they're after, as "the average five-year fixed rate mortgage at 90% loan-to-value (LTV) from a building society is an impressive 0.72% lower than that offered by the main banks," Charlotte discovered. "This represents a saving of £76.30 a month [based on a £200,000 repayment loan over 25 years] if borrowers opt for the average five-year rate (at 90% LTV) with a building society (2.94%), instead of the similar average from one of the main banks (3.66%)."

Our first-time buyer chart reflects this, with providers such as the West Brom, Yorkshire and Buckinghamshire building societies stealing all the spots. Charlotte continued: "Building societies clearly want to be seen as supporting first-time buyers, and offering lower rates is just one of the ways they can do this. This group of lenders also tend have a more flexible underwriting process, allowing to them to more flexibly consider the needs of these borrowers."

What's in a name?

This news may help you look beyond the well-known brands to pick a mortgage that is tailored to your situation. Remember, though, that there's more to a product than the headline rate. Rather than switching your allegiance exclusively from the big banks over to building societies, consider all products equally, focusing on rate, fees and flexibility. After all, these features are much more important than the brand behind it.


Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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