Best mortgage providers revealed

Home is where the heart is, but for the average UK homeowner, home is also where you can get a mortgage. The average mortgage is £117,000, according to recent figures from the Council of Mortgage Lenders (CML).

This is £10,000 less than the average back in 2007, but for most homebuyers the main issue with mortgages is less the total amount of the loan and more about finding the right product for them.

After a tough couple of years, the number of mortgages available is climbing again, with 2,076 products available in April of this year – an increase of 71.7% since the all-time low of April last year, when there were only 1,209 mortgages available.

Clearly the market is still subdued, but it's encouraging to see things are moving in the right direction again, with gross mortgage lending rising an estimated 3% to £11.5 billion since March 2009, according to the CML.

Meanwhile, the stamp-duty holiday for first-time buyers on properties valued up to £250,000 is welcome too – although it's not enough to lift the whole market by itself.

Statistics aside, buying a property and looking for a new deal for your existing mortgage is a huge financial commitment. And that is why we run the Moneywise Mortgage Awards.

These are aimed at helping you find the right mortgage, so we haven't just looked at the flashy advertised interest rates, we've also taken into account the charges, customer service and extras that the best mortgage products offer – all to ensure we find the best deals for you.


WINNER - The Co-operative Bank

RUNNER UP - Royal Bank of Scotland

The average two-year fixed rate has hit its lowest level since April 2008, according to At 4.62%, this would reduce a fixed repayment on a £150,000 mortgage by £316 (paying £853).

Three and five-year deals have also come down, and given that many experts believe the base rate will go up by the end of the year, securing a competitive fixed rate while levels are low could make sense.

This year's winner, The Co-operative Bank, is one of the few lenders to offer a 10-year fixed rate. Whether you'd want to be tied to a rate for that long is debatable, but there's no question the provider offers market-leading rates.

"It has consistently offered a competitive range of fixed rates during the year," says Ray Boulger, senior technical director at broker John Charcol.

Royal Bank of Scotland, runner-up in this category, is praised for its competitive rates too.

Katie Tucker, chief operating officer at Private Finance, says: "The rates are competitive and it offers good, long-end dates on its deals, in conjunction with sub-£500 flat arrangement fees."


WINNER - Market Harborough Building Society

RUNNER UP - Marsden Building Society

While the base rate remains low, the main advantage of discount mortgages is that you'll pay less than the standard variable rate, or SVR, because the discount is linked to this.

However, if the base rate increases then so will the lenders' SVRs, and with this the discount rate.

There are often early repayment charges during the discounted period, should you switch. So the fact that this year's winner, Market Harborough Building Society, frequently doesn't include early repayment charges on its discount products is a big coup.

"Market Harborough has shown that smaller lenders can still offer consistently competitive rates, and something a bit different from the competition," says David Hollingworth, mortgage specialist for London & Country.

Marsden Building Society came a close second, with Boulger favouring it for its offset mortgage option with discounts. Tucker adds: "Marsden often features in the top 10 for discount best buys, and is available through several mortgage clubs.

"Its high maximum LTVs and sub-£800 arrangement costs with free legals makes its deals attractive."


WINNER - First Direct

RUNNER UP - Yorkshire Building Society

Homeowners who fall into the new 50p tax bracket could use an offset mortgage to counter some of their losses.

Offset mortgages work by combining your savings and mortgage so that you only pay interest on the mortgage amount, minus the amount of savings. 

Given the low interest rates on savings (easy-access rates can be as little as 0.10% with, for example, Nationwide's e-savings), if you've got the money, an offset mortgage could be a way of combating this.

Last year's winner, First Direct, takes top spot again. "First Direct's rates are fantastic and its consumer reputation is strong," says Tucker.

Hollingworth is impressed with the lender's competitive pricing on its offset products, which are often better priced than standard offerings.

He also praises runner-up Yorkshire Building Society, whose wide range of offset deals charge just 0.1% more than its non-offset products.

"Yorkshire Building Society has produced a very solid offset proposition, with some well-priced fixed products," says Hollingworth. "It also offers the rare option for parents to help their children by offsetting their own savings against the mortgage."


WINNER - The Mortgage Works

RUNNER UP - Coventry Building Society

Despite the buy-to-let bubble bursting in the recession and the market contracting substantially (in 2007 the number of new buy-to-let mortgages was 346,000, compared with 93,500 last year), the last quarter of 2009 saw some slight growth.

The low base rate has benefited buy-to-let mortgage holders, the majority of whom pay interest-only.

Finding a lender willing to lend on a buy-to-let mortgage is tough, though, and many have withdrawn their buy-to-let products or greatly reduced their range. Our winner this year, The Mortgage Works, has defied this trend.

"The Mortgage Works offers a competitive product range with market-leading criteria," says Sally Laker, managing director at mortgage broker Mortgage Intelligence.

She adds: "It continuously looks at product development and niche areas of the market to launch into." One such niche area is properties in need of light refurbishment.

Laker is also positive about The Mortgage Works' "excellent service".

Runner up in this category is Coventry Building Society – another regular on the best-buy tables in terms of rates. However, it also wins praise for its competitive pricing, with its flat-rate fees, free valuation and free legal costs on remortgages.

"Coventry Building Society has maintained a strong showing in the buy-to-let market with a well-priced range that doesn't carry the high fees that have proliferated elsewhere," says Hollingworth.

Another consideration with buy-to-let products is the potential limits on portfolio value. Both winner and runner-up in this category cater for professional landlords – Coventry caters for those with no portfolio limit and The Mortgage Works gives loans of up to £1.5 million at 50%.


WINNER - Alliance & Leicester (Santander)

RUNNER UP - Northern Rock

A relative newcomer to the mortgage market, flexible mortgages allow homeowners to make overpayments without being hit by early repayment charges.

Homeowners also have the option to drawback these overpayments when required, make underpayments, or defer payment altogether.

Usually with lower SVRs than normal, these are ideal if you intend to pay off your mortgage before the term ends.

The winner in this category, Alliance & Leicester (Santander), manages to combine a good rate alongside fantastic flexibility.

"It's one of the few lenders that offers fully flexible mortgages, with unlimited early repayment charges and free overpayments – albeit only on its tracker range," says Boulger.

"There's no underwriting when borrowers want to borrow back overpayments, and the rates have been competitive."

Second-placed Northern Rock, which also came second last year, is popular with borrowers requiring larger loans, offering 80% LTV on up to £1 million.

Boulger says: "Northern Rock's flexible mortgage offers full flexible features alongside a competitive product. It has identified that not all flexible features are always required so has produced a range where the rates are keener. However, it only has a 10% overpayment facility."


WINNER - Woolwich

RUNNER UP - First Direct

The Bank of England base rate last changed in March 2009 and it's not expected to go up again until the latter part of 2010. However, what's bad news for savers is great news for homeowners.

Legal & General's latest quarterly Mortgage Purchase Index highlights the big shift towards tracker mortgages, with 43% of residential mortgages tracker rates compared with 17% in the previous quarter.

Even though fixed rates are relatively low, they are still significantly higher than tracker deals, so switching to one of these products is attractive in the short term – although this could change if the base rate rises sooner or more sharply than predicted.

In first place, for the second year running, is Woolwich. All its products come with a free valuation and there are no legal fees on remortgages.

"Woolwich has consistently had market-leading lifetime trackers throughout the year, and if you add to this the flexible features it offers, this has made these products extremely attractive," says Laker.

First Direct is this year's runner-up, praised for its consistent rates and low fees. "First Direct has consistently been the market leader for LTVs up to 65%, and all its tracker rates are on an offset basis as a bonus. It also has no early repayment charges," says Boulger.



RUNNERS UP - RBS, Clydesdale Bank, Yorkshire Bank

First-time buyer mortgages make up just 7% of the market, according to Boulger, highlighting the struggle prospective homeowners face in saving up a significant enough deposit to get a good mortgage deal.

However, there are some silver linings with the stamp duty concession, low base rate, falling property values and a smaller but more competitive market.

This year's winner, HSBC, is particularly generous towards customers who already have a current account with the bank.

"HSBC has consistently offered strong rates for homebuyers, including high LTV deals with low fees that will appeal to first-time buyers," says Hollingworth.

There are three runners-up in this category. RBS is commended by Tucker for its "competitive rates at high LTVs above 85%". Clydesdale Bank and sister-lender Yorkshire Bank again offer impressive LTVs (both offer the same products).

"They have even maintained a deal at 95% LTV when others have withdrawn," says Hollingworth.  


WINNER - Alliance & Leicester (Santander)

RUNNER UP - Yorkshire Building Society

Everyone wants to get the best deal, and comparing financial products has become the norm. Switching your mortgage to another lender could help you save money on your mortgage bills, but it's important to factor in any additional fees and charges.

Alliance & Leicester takes top spot, thanks to its free valuations and legal services. "Not only are the rates good but the range of fee packages offers something for everyone," says Hollingworth.

Yorkshire Building Society and HSBC are in joint second place. Tucker commends the former for its competitive rates: "At £495, its typical fee is exceptionally low, and remortgagers also get a free valuation and legal fees."

Boulger praises the latter's "innovative fixed rates that match the borrower's previous rate and adjust the fee to make its required margin".

The judges
Ray Boulger: senior technical director at mortgage broker John Charcol
David Hollingworth: mortgage specialist at broker London & Country
Sally Laker: managing director of mortgage broker Mortage Intelligence
Katie Tucker: chief operating officer at Private Finance


Your Comments

With fixed rate mortgages so low at present surly they make the most sense given the amount of money the Bank of England has pumped into the economy. Inflation is already starting to come through and this is likely to continue. At some point over the next year the bank is going to have to act on this with higher rates surly, it is in their mandate for a start.

I have 4 years left on my Mortgage (£19000). Currently it is on a fixed rate which terminates this August 2010.

Any ideas on the best way forward


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