Alliance & Leicester crowned most competitive lender, as seperate figures show mutuals are increasing SVRs
Alliance & Leicester was the most competitive mortgage lender over the last three months, research released today has shown, as experts herald burgeoning competition in the market for home loans.
The lender, which is owned by Santander, consistently offered competitive interest rates to borrowers between October and December, according to an analysis by realpricecomparison.com, the price comparison website. It looked at the frequency that lenders appeared in its best-buy tables.
Online bank First Direct and its owner HSBC were the second and fourth most competitive lenders respectively, the research found, while Woolwich, owned by Barclays, was third.
Mortgage rates fell dramatically in the last half of the year as lenders fought to attract borrowers with the largest deposits and the cleanest credit histories.
Alliance & Leicester recently offered borrowers with a 30 per cent deposit a tracker rate of 1.99 per cent above base, a pay rate of 2.49 per cent, for two years. The deal was available through London & Country, the broker. HSBC and Woolwich both offered home loans with a starting interest rate of 1.99 per cent.
Francis Ghiloni, commercial director at realpricecomparison.com said: “It is encouraging to see more lenders becoming competitive and changes in the top 10 with three new lenders coming in. Increased competition in the mortgage market is the key to continued recovery in 2010 and a return to growth in the market.”
Alliance & Leicester mortgages are now only available on the high street through branches of Santander, or via brokers.
David Hollingworth, of London & Country Mortgages, the broker, said: “Alliance and Leicester is consistently competitive, but borrowers should remember that many of its fees come with hefty percentages. It becomes important for homebuyers to look past the headline rate.”
The figures come as a number of building societies have been exposed for hitting borrowers with higher standard variable rates, which are traditionally linked to the Bank of England base rate.
Seven building societies have increased their SVR since the Bank of England cut interest rates to 0.5 per cent in March last year. Marsden was the latest mutual to punish borrowers with a 0.46 percentage point increase in its SVR to 5.95 per cent on January 1. Next week Mansfield Building Society will hit borrowers with a 0.35 percentage point hike in its SVR to 5.59 per cent.
Darren Cook, Spokesperson for Moneyfacts.co.uk, said: “In recent months providers have been forced to increase savings rates in order to raise funding in a very competitive market. Increasing the SVR may be the only way some can offset this cost.
“The momentum to increase SVRs appears to be gathering pace and now that a few have taken the step, it is highly possible others will follow.”
Building societies marginally decreased gross lending to £1.5 billion in November, from £1.6 billion in the previous month, according to the latest figures released this week by the Building Societies Association, the trade body. It said that only 1,291 loans were approved by the mutual sector in November, the lowest figure since August.
James Charles
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