Pricey home loans cost £1,200 extra

By David Prosser

The average mortgage borrower paid up to £1,200 in unnecessary interest charges last year, by not finding the cheapest possible deal, according to new research from Moneyfacts.

The analyst's annual home loan survey, published today, shows that borrowers with Egg, the UK's cheapest mortgage lender, would have paid £1,160 less over the past 12 months than customers of The Mortgage Business, the most expensive company in the research.

Egg would have made interest charges of £5,697 on a £100,000 debt over the year to 1 July. Borrowers at The Mortgage Business would have paid £6,857. Moneyfacts named Egg, HSBC, First Direct, Intelligent Finance and Nationwide Building Society as the five cheapest mortgage lenders. It said mutually owned building societies and direct lenders offered better value than the high street banks. Barclays, Lloyds TSB and Royal Bank of Scotland all finished in the bottom half of the Moneyfacts' table, as did Halifax.

However, the research only reflects lenders' standard variable rates and does not include special short-term deals.

Moneyfacts said that the average mortgage borrower had paid £401 more in interest charges over the past 12 months, compared with the previous year, even though the Bank of England raised its base rate just once during the period.