Building society mortgages getting cheaper

Building societies have increased their presence in the top ten cheapest mortgage lenders.

That is according to Defaqto, which reveals that two of the top five cheapest lenders in 2007 were building societies.

In addition, half of the top ten were also firms of this type, although the number one lender was actually a bank.

Defaqto looked at a typical £50,000 mortgage for an existing customer at the standard variable rate.

It found that HSBC was the cheapest, with borrowers paying £3361.99 in interest every year.

Although this was £73.08 cheaper than its closest rival, David Black from Defaqto pointed out that it was still expensive historically.

"In 2007 there were three increases in Bank base rates and one decrease so it is not surprising that the average cost of servicing a standard variable rate mortgage for the largest lenders rose last year by 14 per cent over the cost in 2006," he said.

"While it is acknowledged that standard variable rate mortgages are only one type of mortgage, their importance may be increasing due to the knock-on effects of the credit crunch, making it more difficult to obtain attractive alternative deals," added Mr Black.

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