The best mortgage providers 2015
Whether you've got your heart set on a fixer- upper or a new-build property, it's easy to get carried away when you're buying a new home. Renovating, furnishing and decorating all take time and money so if you want to really make your home your own, it pays to spend as much time seeking out the right mortgage to ensure you don't pay over the odds.
If you are on a tight budget, you might want the certainty that your repayments won't rise, while if you have a decent amount of savings you may want to offset these against your loan to reduce the level of interest you pay. Some buyers may simply be after the cheapest deal, while others will be looking for a good deal that they won't have to keep switching. First-time buyers may simply just want a deal.
Even once you know what sort of deal you're after, you still need to sift through the numerous lenders and products available. So to help you through the maze, our mortgage awards reveal the best lenders across eight different categories to help you find the right mortgage whatever your needs or circumstances.
BEST LENDER FOR FIXED RATES
WINNER: YORKSHIRE BUILDING SOCIETY
HIGHLY COMMENDED: BARCLAYS, HSBC
This category was almost too close to call. With interest rates set to head in only one direction, borrowers are preferring the certainty offered by fixed-rate mortgages and with competition between lenders so high, they no longer have to pay a premium for that peace of mind.
"This is a very tough category given it's been a key battleground for lenders, with most borrowers electing to lock into a fixed rate," notes David Hollingworth, awards judge and associate director for broker London & Country. Commenting on our winner who takes the crown for the third year in a row, he adds: "Yorkshire Building Society has priced its fixed deals very competitively and has often been market leading.That has not just been in one or two areas but through higher loan to value (LTV) and with varied fees."
Judge Jonathan Harris, director at mortgage broker Anderson Harris, also praised the lender's underwriting. "Its affordability calculations are very progressive."
So close was this category we have awarded joint runner-ups: Barclays and HSBC. Fellow judge Andrew Montlake, director at mortgage broker Coreco, says of Barclays: "Consistency of competitive rates has been a hallmark of its performance this year but for me this has to be backed up by good service and criteria that means borrowers can actually get access to the products.This puts Barclays ahead of the pack."
Hollingworth commends HSBC for its table-topping rates and support for those taking their first steps on to the property ladder."HSBC broke the 2% barrier on a five-year fixed rate recently but has also offered deals well suited to first-time buyers with small deposits," he says.
BEST LENDER FOR DISCOUNTS
HIGHLY COMMENDED: PRINCIPALITY BUILDING SOCIETY
Our winner this year is the ultra-competitive HSBC, which has not only been able to boast great discounts but has also maintained its standard variable rate (SVR) – which the deal reverts to after the initial rate expires – at a respectable level.
Hollingworth says: "Its two-year discount with a rate of just 0.99% hit the headlines when it launched but has been a steady presence in the HSBC ranges along with other competitive options. Although borrowers should always review their deal, the standard variable rate to which the discount applies is also at the lower end of the spectrum."
In a market that is currently so biased towards fixed rates, judge Aaron Strutt, product and communications manager at Trinity Financial, adds that the lender deserves credit for maintaining a variety of product types. "Most lenders don't tend to offer discounted deals but HSBC certainly has some tempting options."
The runner-up in this category is the Principality Building Society. Commenting on the lender, Strutt says: "Principality has really boosted its range of discounted mortgages over the past year and it has offered some very cheap rates."
BEST LENDER FOR OFFSET MORTGAGES
WINNER: SCOTTISH WIDOWS BANK
HIGHLY COMMENDED: FIRST DIRECT, CHELSEA BUILDING SOCIETY
This type of deal enables borrowers to offset their savings against the value of their loan. By doing so, homeowners can reduce their interest payments, which can help them pay off their mortgage faster. Our winner in this category Scottish Widows Bank, which offers this facility on all its mortgages.
Montlake says: "This is the oft forgotten lender of Lloyds Banking Group but it has quietly been offering some excellent offset products with great service and underwriting processes. Still a staple for professionals looking for a mainstream lender who looks at them favourably and good on large loans, it deserves to come out of the shadows."
Hollingworth adds:"It offers a good spread of tracker and fixed options as well as help with remortgage costs."
BEST LENDER FOR BUY TO LET
WINNER: BM SOLUTIONS
HIGHLY COMMENDED: VIRGIN MONEY
Following the abolition of the pension rules that limited how retirees spend their pension savings, the spotlight is definitely on this sector, with many retirees now investigating alternative means of turning their pension into an income.
Our winner this year was streets ahead of the competition. Commenting on BM Solutions, Strutt says: "BM has a very attractive buy-to-let mortgage proposition and is one of the more generous lenders. It has excellent rates and its online platform is great for producing fast mortgage offers."
Hollingworth describes it as the "one to beat", claiming it's able to "tick all the boxes". Nonetheless, Montlake remains a big fan of our runner-up, Virgin Money. He says: "It has really worked hard on its buy-to-let proposition and is now up there challenging with great rates and good service and deserves the accolade for effort alone."
BEST LENDER FOR FIRST-TIME BUYERS
HIGHLY COMMENDED: POST OFFICE
It's not easy being a first-time buyer – rising house prices, rock-bottom saving rates and tougher lending criteria all conspire to make taking that elusive first step on the property ladder harder than ever. So this vital category rewards those lenders that are going the extra mile to make life that little bit easier for first-timers.
For the second year in a row, the honour goes to Nationwide Building Society. "Nationwide is a lender that is typically there or thereabouts on price, no matter what your profile. However, it goes a step further for first-time buyers who so often need to keep costs to a minimum, with a £500 reduction in certain arrangement fees," notes Hollingworth.
Montlake agrees: "It has set its stall out to help the first-time borrower this year and has a broad spread of good products at higher loan to values and some excellent service." Jonathan Harris, director at broker Anderson Harris praises the lender, too, for considering "100% of bonus income and a positive approach to underwriting".
The Post Office comes in at a close second place. Hollingworth says: "The Post Office has had a very strong year, competing across the board but pulling particularly good deals together for those with smaller deposits. Those with a 10% deposit will have often found Post Office right at the sharp end on price and those with 5% will have been well served by the Help to Buy guarantee-backed deal."
BEST LENDER FOR LIFETIME TRACKERS
WINNER: FIRST DIRECT
HIGHLY COMMENDED: SANTANDER
This year, First Direct takes pole position in the lifetime tracker category, a part of the market popular among borrowers who don't want to keep changing their mortgage. Hollingworth says: "It's hard to see past First Direct, considering the keenly priced lifetime trackers it has offered throughout the year. In addition to headline rates, products come without any early repayment charges at any time and there are offset options on top."
Strutt adds: "Another benefit is that it also offers a good level of customer service and borrowers can lock into a fix at any time."
The runner-up is last year's winner, Santander. Hollingworth says: "Santander offers sharply priced lifetime tracking deals and although not the biggest range of options, they cover plenty of options.That includes an offset option and loyalty deal for existing customers with a reduced fee."
BEST LENDER FOR REMORTGAGES
HIGHLY COMMENDED: HALIFAX
The right mortgage won't just help you buy a new home, it can also help you stay in it if your existing deal is starting to look uncompetitive or your repayments have risen.This year, Barclays-owned Woolwich has led the way in this category.
"Barclays deserves real credit for continuing to push the remortgage agenda this year," observes Hollingworth. "We have seen very competitive remortgage packages together and the Great Escape deal continues to offer not only no arrangement fee, free valuation and free legal work but also an additional £400 cashback."
Strutt agrees and adds: "Its rates have been excellent all year and it also has a range of arrangement-fee-free mortgages. It has also improved its online submission system to make sure more customers get a speedy mortgage offer."
Taking second place this year is Halifax. "Halifax is particularly keen to make sure both new and existing customers do not revert to standard variable rates. It offers existing customers the chance to do a product transfer to secure a better deal and it offers new borrowers good rates with incentives to switch to it."
INNOVATOR OF THE YEAR
HIGHLY COMMENDED: THE FAMILY BUILDING SOCIETY
Product development is key in making home loans more accessible and to ensure borrowers get the best value from their deal. In this respect there are often gimmicks out there to attract borrowers but among the gimmicks is usually some genuine help.
So the award for innovator of the year goes to Halifax for its stamp duty campaign. For a period of two months last year, the lender offered to pay 1% cashback on completion for all loans valued between £125,001 and £250,000 (subject to a maximum of £2,500) – effectively paying buyers' stamp duty for them.
Montlake says: "Halifax has been looking to innovate where it can for some time now, with its Lend a Hand products and stamp duty campaign being good examples.Together with good rates and an unwavering commitment to first-time buyers, it is an excellent overall lender."
The Family Building Society took the runner-up prize once again in recognition of its support for struggling first-time buyers. Its Family Mortgage adds wider family assets into the mortgage calculation, cutting costs for borrowers but without asking relatives to hand over money as a gift.
"Understanding that first-time buyers continue to rely on the Bank of Mum and Dad to make their dream of property ownership real, Family Building Society offers alternatives that can add real value. Not all parents can simply hand over a cash gift, so being able to use other assets to support lending to their child is a very useful alternative. Family has put these solutions at the heart of its brand."
David Hollingworth, mortgage specialist at London & Country
Andrew Montlake, director Coreco
Aaron Strutt, product and communications manager at Trinity Financial
Jonathan Harris, director at Anderson Harris
Every mortgage lender has a standard variable rate of interest, or SVR, on which it bases all its mortgage deals, including fixed and discounted rate and tracker mortgages. When special deals come to an end, the terms of the deal usually state that the borrower has to pay the lender’s SVR for a period of time or pay redemption penalties. The lender’s SVR is, in turn, based on the Bank of England’s base lending rate decided by the Bank’s Monetary Policy Committee (MPC). Every time the MPC raises its rate, mortgage lenders generally increase their SVR by the same amount but when the MPC lowers its rate, lenders are often slow to pass this on or don’t pass on the full cut to borrowers.
A catch-all phrase that can range from assessing the price of a property or vehicle before offering it for sale or the net worth of assets in an investment portfolio to the prices of shares on a stock exchange.
A hugely unpopular tax paid on property and share purchases. Stamp duty on property is levied at 1% for purchases over £125,000 (£250,000 for first-time buyers) which then moves up at a tiered rate. For property between £125k and £250k you pay 1%, then 3% from £250k up to £500k and then 4% from £500k to £1m and then 5% for properties over £1m. But unlike income tax, which is “tiered” and different rates kick in at different levels, stamp duty is a “slab” tax where you pay the rate on the whole purchase price of the property. On shares, stamp duty is charged at a flat rate of 0.5% on all share purchases. Figures correct as of May 2011.
The catch-all term applied to investors who buy properties with the sole intention of letting them to tenants rather than living in them themselves, with the proceeds from the let usually used for the repayment of the mortgage. Buy-to-let investors have to take out specialised mortgages that carry higher interest rates and require a much bigger deposit than a standard mortgage. Other expenditure can include legal fees, income tax (on the rental profits you make), capital gains tax (if you sell the property) and “void” periods when the property is unlet.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.
A charge some brokers (and, increasingly, lenders) make for arranging your loan or mortgage, either as a flat fee or a percentage of the amount you wish to borrow. In order to look ultra-competitive in the best-buy tables, some mortgage lenders will offer mortgages with an attractive low rate and recoup any losses with a hefty arrangement fee.
Loan to value
The LTV shows how much of a property is being financed and is also a way to tell how much equity you have in a property. The higher the LTV ratio the greater the risk for the lender, so borrowers with small deposits or not much equity in the property will be charged higher interest rates than borrowers with large deposits. The LTV ratio is calculated by dividing the loan value by the property value and then multiplying by 100. For example, a £140,000 loan on a £200,000 property is a LTV of 70%.