Building societies coming out on top in rate war

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Building societies are outstripping banks when it comes to offering the cheapest mortgage rates, according to new research.

The average five-year fixed rate offered by banks is 3.51 per cent, while the average rate offered by building societies is 3.21 per cent – a difference of 30 basis points – says Moneyfacts.co.uk.

When it comes to two-year fixed rates, the average rate on offer from banks is currently 2.78 per cent, while the average on offer from mutuals is 2.54 per cent.

Building societies have five products in both the 10 lowest-rate two-and five-year fixes.

Moneyfacts.co.uk spokeswoman Charlotte Nelson says: “Not only do building societies come out on top when it comes to rates but the gap between their offers and those from banks is getting wider, suggesting that borrowers may need to look away from traditional banks to get the best deal.

“It is little wonder that building societies are doing so well as they are currently dominating the best buy charts. Indeed, several building society products are currently leading the market.

“It is disappointing that despite all the money given to banks from the Government-backed Funding for Lending scheme and the ever-growing price war between providers that banks are still failing to compete on the overall cost.

“Now that local building societies are offering a genuine alternative to banks, perhaps it is time for borrowers look closer to home to get the best mortgage deal.”