Mortgage blog: Building societies offer cheaper deals to borrowers


Tuesday 14th August 2012

Choosing a higher interest rate could sometimes save you money

When you are shopping around for a new mortgage it is important to take two factors into account. Firstly, you should look at the interest rate that you will pay; and secondly you should look carefully at any associated arrangement fee.

New research has found that building societies charge, on average, lower arrangement fees than banks for their mortgage deals. So when choosing your next mortgage, should you turn to a mutual lender?

Research finds that building societies charge lower fees than banks

Research from the comparison website has found that there is a big difference between the arrangement fees attached to mortgage products despite the average two-year fixed-rate mortgages from building societies and banks being similar (4.15% and 4.22% respectively).

The Daily Telegraph reports that "overall, building societies offer much lower arrangement and booking fees which could help to save consumers over £700 over the term of the mortgage deal". For example, the difference between the top rate for a two-year fixed mortgage with a 90% loan-to-value from First Direct and Chelsea Building Society is 0.2%. However, when you take the fees into account, you will save £1,000 by taking the First Direct deal.

The newspaper reports that "this is more marked with five-year fixed-rates where opting for NatWest's mortgage rather than that from Chelsea Building Society could result in a saving of £3,500 over the term of the deal".

Clare Francis, mortgage expert at, said: "Don't just go to the big banks as there are some great deals available from smaller lenders too and it's really important to get the best product as it could literally mean the difference in cost of thousands of pounds. It can work out cheaper to opt for a product with a higher rate in return for lower set up costs - it will depend on the size of the loan. Therefore when comparing mortgages you need to calculate the total amount you'll pay over the term of the deal - monthly repayments plus fees - in order to work out which will be the best value for you."

Keith Osborne from says: "This research shows that it can be cheaper to get your home loan through a building society than a bank and it highlights the need to take any arrangement fees into account when you choose a mortgage deal. For example, on a £100,000 mortgage it is actually better to take a two-year fixed-rate deal at a 0.2% higher rate than it is to pay a £500 higher arrangement fee. While it may seem counter-intuitive to pay a higher interest rate, it could actually save you money."

Click here to find out more about how can help you find the right mortgage.

New Homes by Berkeley Homes

Ebury Square
NOW AVAILABLE from £1,950,000
In the heart of Belgravia, London's most prestigious village neighbourhood, lies Ebury Square - a development of one to five bed private residences,...
Bersted Park
NOW AVAILABLE from £215,000
The new homes at Bersted Park, West Sussex, are set within some of the South East's most stunning countryside. Here you'll find leafy woodland walks...
Vista, Chelsea Bridge
NOW AVAILABLE from £820,000
Introducing Vista, a brand new collection of luxurious 1, 2 and 3 bedroom apartments and penthouses boasting exemplar specification and unique...
NOW AVAILABLE from £750,000
Edenbrook in Fleet is a beautiful collection of contemporary 2,3,4 and 5 bedroom new homes. Set on the edge of a stunning 82 acre Country Park,...
NOW AVAILABLE from £525,000
Situated in charming Caterham on the Hill, Oakgrove is set within its own parkland, and combines the pleasures of both town and country life - all...
Roman House
NOW AVAILABLE from £4,250,000
Roman House represents a unique new opportunity; the chance to acquire a luxury apartment in the very heart of the City of London, undisputed leader...
NOW AVAILABLE from £316,950
An attractive collection of houses and apartments, situated adjacent to the peaceful Sevenoaks Wildlife Reserve in the rolling Kent countryside, yet...
Imperial Square
NOW AVAILABLE from £495,000
An exquisite collection of gated 2 and 3 bedroom apartments and 3 and 4 bedroom homes carefully designed to exude the finest of Berkeley quality...
The Avenue
NOW AVAILABLE from £695,000
Distinguished by its heritage architecture, choice of properties and landscaped setting rich in mature trees, The Avenue promises an exclusive...
St. Joseph's Gate
NOW AVAILABLE from £915,000
An exclusive opportunity to live in a truly unique location; a collection of highly distinctive 2, 3 and 4 bedroom new and refurbished apartments set...
One Tower Bridge
NOW AVAILABLE from £3,360,000
One Tower Bridge is situated on one of the last great riverside sites in London. Just moments from the City it offers the ultimate in 5-star luxury...
Sandlands Park
NOW AVAILABLE from £950,000
Welcome to Sandlands Park; an exquisitely crafted collection of just thirteen luxury 2, 3, 4 and 5 bedroom detached new homes, set in a gated...