Building societies 'offering competitive mortgage deals'

Research conducted by Defaqto suggests that building societies are becoming increasingly competitive.

According to the financial product research company, two of the top five cheapest lenders in 2007 were building societies.

Defaqto based its findings on a comparison between typical £50,000 mortgages offered by lenders to customers at the standard variable rate.

Overall, HSBC was found to offer the best deal, although Defaqto's David Black noted that it was still expensive when put into context.

"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.

Borrowers pay £3361.99 in interest every year on HSBC's £50,000 standard variable rate mortgage - £73.08 less than if they opted for its nearest rival.

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