Building societies offer better mortgage rates than banks

Building societies are offering better deals than banks, new analysis from lender Castle Trust shows.

The analysis of best buy tables shows 83% of the top mortgage deals come from mutuals.

An overwhelming 33 out  of 40 of the best deals across fixed, variable and buy-to-let come from building societies.

It shows a big increase from 18 out of 40 recorded in 2008.

Best buy building society mortgage rates have fallen to an average of 3.21% compared with 3.81% in October 2012 and a huge 6.2% in 2008.

The dramatic drop of 0.6% since October could be explained by the introduction of the funding for lending scheme in August.

The scheme has taken effect over the autumn and caused rates to notably fall in the last six months.

As well as offering the best rate building societies are also lending to far more people now than ever before.

In February societies lent £2.5bn, representing 21.5% of the mortgage market which is almost double the 12.9% they took in 2009.

An alternative to the banks?

Since the near collapse of the banking system in 2008 the major lenders have been cutting back on their lending and risk-taking.

The state-owned Royal Bank of Scotland is on a path to shrink to a much smaller size which hits its mortgage lending.

Lloyds Banking Group and Santander have also signalled plans to shrink their market share of mortgage lending.

It has given an opportunity for building societies and smaller lenders to pick up lots of business because there is still demand to buy homes.

Building societies can offer deals in more specialist areas such as self-employed mortgages, poor credit history or high loan to value deals.

Major banks are not offering many deals in these areas so the appetite to take them up is huge and they are filled up quickly.

Some societies can offer a more personal approach for customers and may not credit score in the same way as big banks.

Each borrower is an individual case and borrowers will be treated on their merits more rather than fitting into a neat box of a major bank.

How to choose the right building society

The number of building societies has shrunk dramatically since the 1970s when there was almost one in every city.

Societies like Halifax and Northern Rock decided to become banks in the 1990s while others were forced to merge during the credit crunch.

Despite this there are still nearly 60 around and they all have different rules around how to access them.

Some deals are only available to local residents, some are national while others only through certain mortgage brokers.

To scour this market properly you need to speak to a qualified independent mortgage broker.

They will know the different deals at building societies and whether they are available to you.

It can be daunting for a borrower to check out every building society from Manchester to Melton Mowbray.

The only way you can be sure to get a piece of building societies’ top rates is to speak to a broker to guide you through the deal.