New research by the comparison site Moneyfacts found that building societies offer below-average rates to first-time buyers who have a 5% or 10% deposit.
Read on to find out about the pros and cons of borrowing from a mutual, and for the lowdown on some of the more innovative mortgage deals currently available to first-time buyers.
Do building societies offer cheap rates?
The table below shows how deals from building societies compare with the overall market.
Moneyfacts says high street banks typically have more margin to offer better initial rates, but that building societies can excel once costs (such as upfront fees) and incentives (such as cashback) are factored in.
Find out more:What's the difference between banks and building societies?
Building societies are owned and run by their members, while banks are usually floated on the stock market, and therefore are owned by shareholders.
Building societies often promote a more local image to customers, but they actually come in all shapes and sizes.
The three biggest – Nationwide, Coventry and Yorkshire – all feature in the UK Finance list of the 10 biggest mortgage lenders in the country.
Data from the Building Society Association shows that building societies collectively approved around 30,000 mortgages a month in 2023.
Overall, the UK's 10 biggest building societies are responsible for a fifth of overall mortgage lending; just over half of this figure belongs to Nationwide.
undefinedAre local options available?
There are 43 building societies operating in the UK, so there are more options out there than you might think.
One drawback for people shopping around is that it can be difficult to differentiate between truly local and national building societies.
Mutuals such as Leeds and Skipton lend across the UK, but others have stricter rules. For example, Cumberland limits deals to customers in Cumbria, south-west Scotland and North Lancashire.
This means that if you see an attractive mortgage on offer from a building society, you'll need to check its lending area, or take advice from a broker on whether you're eligible.
Innovative mortgages for first-time buyers
Moneyfacts says that building societies are at the forefront of launching innovative new products that help first time buyers on to the property ladder.
It picks out the following deals as examples:
Track Record mortgage (Skipton) £5,000 deposit mortgage (Yorkshire) Credit score boost (Leeds)Another high-profile deal is Nationwide's 'Helping Hand' mortgage, which allows first-time buyers to borrow up to five and a half times their annual income.
Building societies and customer service
We've found that the biggest building societies outrank banks for customer service.
As part of our annual mortgage lender reviews, we rated 22 banks and building societies on their customer service and competitiveness of mortgage deals.
All three brands also achieved full marks for their transparency on charges and penalties, and each was named a Which? Recommended Provider.
Find out more:The drawbacks of building societies
It's difficult to compare building societies like-for-like, as the biggest lenders differ dramatically from much smaller, local operators.
If you are considering borrowing from a mutual, weigh up the advantages above with the following potential drawbacks.
Advice on finding the right mortgage
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source https://www.which.co.uk/news/article/do-building-societies-offer-the-best-mortgage-deals-a1clE1B1955j