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Building societies outdo major banks on 95% mortgages

Smaller lenders offering tempting low deposit deals

When looking for a mortgage, most people head to the high street. But a building society may be able to offer you a better deal – especially if you’re a first-time buyer with a 5% deposit. 

A Which? analysis shows building societies offer some of the most competitive mortgage deals for people with small deposits – so, improbable as it sounds, the best mortgage for your dream home in Hampshire might be from a building society in Leeds.

Here, we take a look at how building societies can offer a viable alternative to major banks when it comes to getting your first mortgage.

Are first-time buyer deals competitive?

Though a couple of major lenders have started to offer decent fixed-rate mortgages for buyers with small deposits, the best offers at a high loan to value (LTV) can primarily be found at building societies.

The tables below show how the fixed-rate mortgage deals offered by building societies compare to major banks.

Building societies really come to the fore with deals at 95% LTV – a section of the mortgage market traditionally avoided by some of the bigger players.

First though, a quick word of caution. Not all of the deals you’ll see below are available throughout the UK and none of the top five-year offers are available in Scotland – so while you might strike it lucky, it’s important to check the full terms.

At a 90% LTV, the banks perform more strongly, though building societies are still well-represented. Again, keep in mind that some of these deals may have limited availability.

Does your building society offer mortgages?

Building societies come in many shapes and sizes, but they’re not just tiny local brands.

Indeed, many offer mortgages to people across the UK rather than just in their local area, and three – Nationwide, Coventry and Yorkshire – were among the UK’s top ten biggest mortgage lenders in 2016.

It’s only natural to find this a little confusing, with Nottingham Building Society offering mortgages in Wales and the Scottish Building Society offering them in Cumbria.

It’s also worth knowing that building societies – like banks – have different policies on who can access their mortgages. Some deals might only be available directly, while others will need to be accessed through a mortgage broker.

Use the search bar in the table below to find out whether you could find a mortgage through your local building society – and if so, how you can get your hands on it.

Pros and cons of using a building society

If major banks consider your mortgage application a little risky – and you fear the computer might say ‘no’ – a building society might be the place to go for a better deal, especially if you’re a first-time buyer.

As with anything, there are trade-offs to consider. Your mortgage broker might well be able to pick a diamond from the rough, but things might take a little longer to get over the line.

David Blake of Which? Mortgage Advisers says: ‘Some brokers can access certain smaller building societies’ products which might not be available to them by going directly.’

‘Building societies are often more manual in their approach to underwriting which means they can take a view on certain scenarios – and this this is great for those that don’t tick all the boxes with more rigid high street lenders.’

‘Naturally, though, because manual underwriting can involve obtaining more paperwork, underwriting times can be slow.’

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