Banks offer poor value on mortgages

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The Independent Online

Britain's biggest banks are among the most expensive mortgage providers in the country, research to be published today will reveal.

Figures from the market analyst Defaqto will show that three of the Big Four high street banks did not even make the top 15 best value mortgage lenders during 2005. The exception was HSBC, which Defaqto said offered the cheapest standard variable rate mortgage over the course of the year.

A borrower with a £50,000 standard variable rate mortgage from HSBC would have paid £2,833 in interest costs during 2005. Customers at the next cheapest major bank, Cheltenham & Gloucester, the lending arm of Lloyds TSB, would have paid £500 more. Woolwich, Barclays Bank's lending arm, and Royal Bank of Scotland, were even more expensive, Defaqto said. Halifax Bank, Britain's largest mortgage lender, finished the year level with Cheltenham & Gloucester on interest costs.

Three of the five cheapest mortgage lenders last year were building societies - Nationwide, Skipton and Britannia - while Intelligent Finance, the phone- and internet-based lender, came second in the survey.

The most expensive of the country's 30 largest lenders last year was Bank of Scotland, according to Defaqto. Borrowers with a £50,000 standard variable rate mortgage at BoS would have paid £575 more in interest charges than those at HSBC.

David Black, Defaqto's head of banking, said that while almost all lenders offered a number of more competitive short-term special deals in addition to their standard variable rates, many borrowers did not take advantage of these products.

Defaqto also said that the typical mortgage had cost homeowners 5 per cent more to service in 2005 than over the previous 12 months. While the Bank of England's Monetary Policy Committee cut base rates last August, interest rates throughout the year were higher, on average, than in 2004.