Building societies winning the mortgage rate war | 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.

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Published: 23/01/2017

Competition is still fierce in the mortgage market, and with many high street banks claiming to launch the cheapest products ever on their records, many borrowers could assume that the mortgage rates from these providers will be significantly lower than those offered elsewhere. However, our latest research shows that things aren't always as they seem, as building societies are the clear winners when it comes to the mortgage rate war.

Take a look at the tables below and you'll see what we mean. The average two-year fixed rate for a 60% loan-to-value (LTV) mortgage comes in at 1.92% from banks compared with 1.67% from building societies, so customers of a mutual could get a rate that's 0.25% cheaper. The savings are even stronger when looking at higher LTVs and over longer terms, so it appears that while banks may shout louder about their low-cost deals, it's actually building societies that are quietly offering their loyal customers the best rates available – and in many cases, by a pretty big margin.

Two-Year Fixed Rate Banks
Building Societies Difference
95% LTV Average
4.11% 3.71% 0.40%
75% LTV Average 2.32% 1.74% 0.58%
60% LTV Average 1.92% 1.67% 0.25%

Five-Year Fixed Rate Banks
Building Societies Difference
95% LTV Average
4.65% 4.01% 0.64%
75% LTV Average 3.00% 2.34% 0.66%
60% LTV Average 2.51% 2.24% 0.27%
Source: Compiled 23/01/2017

"Building societies are making their mark on the mortgage market, leaving the banks behind in their wake," said Charlotte Nelson, finance expert at Moneyfacts. "It seems that despite mortgage rates falling to record lows, banks are still failing to compete on cost. In fact, the average two-year fixed rate at 75% loan-to-value (LTV) provided by building societies is a massive 0.58% lower than that offered by banks."

The domination of building societies is clear to see when you cast your eye over our Best Buy tables, where the vast majority of the top two-year fixed rate deals available (five out of six, in fact) are offered by mutuals. More importantly, the lowest deals aren't just reserved for those with larger deposits; as Charlotte points out, building societies are "hitting it out of the park" for first-time buyers, too.

For example, our calculations show that borrowers opting for the average five-year fixed rate 95% LTV deal would find themselves £71.98 a month worse off if they were to choose a mortgage from a bank instead of a building society (based on a £200,000 mortgage over 25 years), so it's clear that mutuals are worthy of your consideration.

"Putting customers first is what mutuals strive for, which is clearly reflected by the fact that borrowers are being offered much lower rates compared to their banking rivals," added Charlotte. "Building societies also have a lot more flexibility when it comes to their approach to underwriting, allowing them to opt for a more personal approach.

"The gap between the banks and building societies suggests that now is the time for borrowers to look away from the big banks and consider something closer to home for a more competitive and cost-effective deal."

What next?

Check out the top mortgage rates, and make a beeline for building societies!


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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