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Best mortgage deals revealed By Hannah Ricci
The average UK mortgage has soared to £123,000 and repayments now eat up a whopping 40% of our salaries each month. First-time buyers face an even bigger burden, taking on an average debt of £150,000 to grab a rung on the ever Over 1.1 million of us took out a new mortgage last year, according to the Council for Mortgage Lenders, bringing the number of borrowers in the UK mortgage market to a massive 11.7 million. Yet, considering that a mortgage is already such an expensive and long-term commitment, it's surprising how many of us are paying way more than we need to for the roof over our heads. A very common mistake is when people come to remortgage after their initial mortgage deal ends, only to find they are still tied in to the lender's standard variable rate (SVR) - which can be as high as 7% or 8% - for a further set period. It's important to understand how the mortgage world works, and to provide you with everything you need to know about taking out a mortgage - the Moneywise Mortgage Awards are a simple way to start your search. Methodology We drew up shortlists for eight out of our nine mortgage categories by analysing data from mortgage broker London & Country Mortgages. We identified the lenders that have consistently offered competitive rates over the past 12 months. The shortlists were passed onto our panel of expert judges who voted for the winners and runners-up in each category. As there is more to a good mortgage deal than a competitive rate, the judges were asked to consider fees, penalties, lending flexibility, the value of any freebies, service standards and the treatment of new and existing customers, in addition to consistent rates, when making their decisions. For our final category, best lender for customer service, we asked our judges to vote for the single UK lender that consistently offers borrowers the very highest level of service. Discount-rate mortgages With an ever-increasing squeeze on our monthly budgets, discount-rate mortgages remain a popular choice to keep monthly repayments to a minimum. This is a tough category, but last year's winner emerged triumphant again and Nottingham Building Society took the award. David Hollingworth, director of communications at London & Country Mortgages, says the Nottingham offers some excellent discount-rate deals, particularly over three years. The judges also like Giraffe Money, which came in a close second. David Hollingworth says Giraffe stands out because it does not levy a higher lending charge (HLC). Base rate hikes Following a succession of hikes in the Bank of England base rates, fixed-rate mortgages have become increasingly attractive for bringing some much-needed stability to monthly repayments. Last year's winner slipped into second place, as Nationwide stepped forward to take the first prize. Ray Boulger, senior technical director at broker John Charcol, praises the lender: "Nationwide has consistently offered very competitive fixed rates and the whole product range offers flexible features." Not far behind was Portman Building Society, which Ray Boulger favours for its consistency. "Portman has offered very competitive two, three and five-year fixed rates throughout the year, and for the last few months, all its fixed rates have been available on 95% loan-to-value with no higher lending charge." The good performance of these lenders is reassuring to consumers, as Nationwide and Portman are expected to merge later this year. Offset mortgages Current account offset mortgages - where your mortgage is offset against your current account or savings account, or both, to save on interest - offer a great deal of flexibility to borrowers. Competition has increased in this category, but showing reassuring consistency, last year's winner Intelligent Finance has been voted the best again. Second place was awarded to First Direct, which David Hollingworth praises for "combining some competitive rates with its excellent telephone and internet banking service." Flexible mortgages Flexible mortgages are an increasingly popular choice, allowing you to alter your repayment method to suit your own financial circumstances. More and more lenders are entering the flexible mortgage market, making this a very tight category, but last year's runner-up, Northern Rock, leapt into first place. "Northern Rock offers full flexibility on all its fixed and tracker-rate mortgages," says Ray Boulger. Sally Laker favours Northern Rock because it offers "market leading rates combined with strong flexible features." Last year's winner, Alliance & Leicester, slipped into joint second place with Woolwich. Buy-to-let Despite numerous warnings from industry experts about the uncertain future of buy-to-let, the market remains popular with investors. Our winner for the past two years - Birmingham Midshires - leapt ahead of the competitors to take first prize again. Cath Hearnden praises it for its "good service and great online system." Birmingham Midshires mortgages are sold under its BM Solutions brand and are only available through IFAs. A relative newcomer to the buy-to-let market, Abbey was a clear choice for second place said the judges. "Abbey always offers very competitive, and sometimes market-leading, fixed rates," says Ray Boulger. First-time buyers With the average first-time buyer having to fork out a whopping £176,000, a helping hand onto the property ladder has never been more valuable. More and more lenders are offering tailored products for first-time buyers, with increased lending flexibility and low fees, making this important category very competitive. Bristol & West took first prize, impressing the judges with its "innovative and flexible First Start package." A very close second was Nationwide, which Sally Laker praises for offering "competitively priced products at 95% loan-to-value, with some great freebies to help reduce costs for first-time buyers." Remortgage Around 1.1 million people remortgaged in 2006, according to the Council for Mortgage lenders, and the remortgage market is growing year on year. Halifax nudged in front of last year's winner to take first place for its "fantastic remortgage range". Ray Boulger praises Halifax's simple application process and freebies. Last year's winner, Nationwide, was close behind in second place. David Hollingworth says it offers great overall value for borrowers, and also has free valuation and legal fees. Lifetime trackers Lifetime trackers are becoming an increasingly popular choice for homeowners who want consistent value without the need to keep remortgaging. Woolwich stormed easily to first place with what Cath Hearnden describes as the "very best product with very low fees". Hinckley & Rugby Building Society came in at a strong second place. Ray Boulger says: "Hinckley & Rugby has consistently offered exceptionally competitive lifetime tracker rates, sometimes below the base rate, and reasonable fees." Customer service The best value mortgage can be worthless if customer service is not up to scratch, which is why we gave our judges freedom to choose from the whole mortgage market when voting in this category. Abbey was favoured by three of our five judges and came out as the winner for its "understanding of customers' needs". Cath Hearnden says it has a "great online system and knowledgeable local staff". Alliance & Leicester came in a close second and was praised for its speedy application process.
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