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Strong sides absent from Premiership

Banks are cheapest for mortgages according to one of those surveys of annual costs that emerge at this time of the year.

According to financial research company Defaqto, in 2006 it was bank customers who got the best deals on mortgages.

For existing customers on a standard variable rate mortgage HSBC was cheapest and Intelligent Finance second.

The headline finding of the survey could make it easy to miss the fact that the next three lenders in the top five were all societies – Skipton, Nationwide and Britannia.

Much as it must delight all of these lenders to take these plaudits for their mortgage offerings I can imagine intermediaries scoffing at these results.

There are so many caveats to this table of so-called “cheapest mortgages” that it is close to worthless.

Firstly, the cheapest mortgages are worked out solely on the amount of gross interest that has to be paid on a 50,000 standard variable rate or equivalent product by an existing customer to his lender. No special deals such as loyalty discounts are allowed to muddy the results.

And a number of lenders – all top Council of Mortgage Lenders members – were not included. Bradford & Bingley, GE Money Home Lending, Kensington Mortgages, Southern Pacific Mortgage Limied, Preferred Mortgages and London Mortgage Company were skipped – I wonder why.

It’s a bit like looking at the performance of clubs in the Premiership but denying a spot to some teams who play every week, then insisting that some of the others don’t field their best players for the matches.

And you have to feel sorry for the lenders that offer special deals for their long-standing members only to find that their ranking is not based on this.

Poor old West Bromwich is ranked 19th in the table but its loyalty deal for borrowers of five years or more would put it in the top five. Coventry is in 21st place but would be in the top 10 if its deal for borrowers of more than five years was included and Northern Rock – languishing in the relegation zone – would also make the top 10 with its deal for borrowers of seven years.

SVRs are a rip-off and borrowers should be encouraged to get off them. We know this because an offset lender – Intelligent Finance – can beat so many of its rivals and its own parent company at this game even though its rate is unlikely to get it in the best buy tables.

And when an offset lender can take second place without the benefits of offsetting factored into any calculations, does this not present a strong best advice argument in favour of offsetting for many more borrowers?


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