The best and worst: Big savings with small lenders - Mortgage lenders

SMALL has shown up as beautiful once again. The best-value mortgage lenders over the past 10 years are all small building societies, according to What Mortgage magazine.

The Chesham Building Society is the 66th society in size, but it leads the magazine's tables over 10 years, five years and two years, and has won the award for Overall Top Lender of the Year.

Over 10 years a pounds 30,000 borrower with the Chesham would have paid pounds 2,300 less than a borrower with a mortgage from Royal Trust, ranked in the table as the most expensive lender. Over 25 years the gap between best and worst would widen to about pounds 7,000.

Among the five best lenders over five years, the largest is the Hanley Economic Building Society, which ranks 50th in size among building societies. By contrast, Midland Bank was rated 54th on the magazine's table, and the Yorkshire Building Society was 56th.

Nia Williams, editor of What Mortgage, believes the smaller organisations can offer better rates than bigger rivals because they have lower overheads. 'People tend to be a bit wary of the smaller societies, but they shouldn't be,' she said.

The Chesham is a case in point. Hardly a fly-by-night, it is the oldest building society, founded in 1845. In the past 15 years, it has had only two repossessions. The society has about 10,000 investors and 1,600 borrowers, and will lend to established borrowers wherever they might move in the country - but it restricts new lending to the Home Counties. 'In times of high interest rates, we tend to help our borrowers,' said Olive Anderson, operations director. 'In times of low interest rates, we tend to help our savers.'

Its current variable rate for mortgage borrowers (it has no fixed-rate products on offer at the moment) is 7.85 per cent. Its savings rates range from 4.5 per cent for a pounds 500 investment to 7.45 per cent on investments over pounds 100,000.

Nia Williams believes that too many people who are seeking a mortgage are attracted by the big-name lenders, and by the allure of short-term discount rates.

This is the first time that What Mortgage has produced these tables, and the results are in many ways surprising.

The Woolwich leads the 10-year and five-year tables among national building societies. The Halifax leads the two-year table in the same category.

Among the national banks, National Westminster heads the 10-year table, Abbey National tops the five-year list and the Bank of Scotland leads the two-year list.

For regional lenders, the Belfast-based Progressive Building Society heads the 10-year list, First Trust (formerly TSB Northern Ireland) heads the five-year, and the Clydesdale the two-year.

----------------------------------------------------------------- BEST AND WORST MORTGAGE LENDERS (Over a 10-year period) ----------------------------------------------------------------- The best Amount paid pounds 1 Chesham Building Society 35,846.47 2 Tipton & Coseley Building Society 36,151.93 3 Chorley & District Building Society 36,167.18 4 Scottish Building Society 36,235.59 5 Hanley Economic Building Society 36,260.80 The worst 57 First Trust Bank 37,208.35 58 Swansea Building Society 37,680.62 59 City & Metropolitan 37,891.47 60 BNP Mortgages 38,064.02 61 Royal Trust 38,154.13 ----------------------------------------------------------------- The tables show the amount of money a borrower would have paid on a pounds 30,000 interest-only mortgage over the 10 years to the end of 1992. Source: What Mortgage -----------------------------------------------------------------

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