Ray Boulger pours scorn on moneyfacts study

Ryan Bembridge

February 6, 2018

John Charcol senior technical manager Ray Boulger (pictured) has taken a swipe at moneyfacts for its comparison of bank and building society rates.

Yesterday moneyfacts said typical 5-year fixes cost 3.00% from banks and 2.59% from building societies, while 2-year fixes cost 2.33% from banks and 2.27% from societies.

However Boulger was critical of the decision to compare all building societies to just the following banks: Barclays, Halifax, HSBC, Lloyds Bank, NatWest, Royal Bank of Scotland, Santander and TSB.

He said: “For a meaningful comparison all banks should be included as well as all building societies.

“At 60% LTV the cheapest bank, Metro, is excluded from the comparison and at 90% LTV the second cheapest bank, Digital Mortgages, has been excluded, which helps to skew the figures.”

Moneyfacts made the calculation by taking all of the rates for banks and societies and averaging them out to.

Charlotte Nelson, moneyfacts spokeswoman, said: “We did compare all of the banks and it showed the same trend, with slightly less of a gap between bank and building society rates.

“We chose to focus on the main banks because we always get requests about them.”

She added: “We’re not suggesting that everybody should go to a building society.

“The gap between banks and building societies rates has shrunk in the last couple of years.”

She went on to say another question to ask is how many customers are able to get the advertised rates with both provider types.

Boulger also questioned why studies such as these combine products at different loan-to-values.

He added: “From a borrowers’ perspective average rates are pretty meaningless – what is important are the best rates they qualify for.

“In general the banks are cheaper at the lower LTVs and the building societies are more competitive at the higher LTVs, and at 95% LTV the building societies are usually the cheapest.

“This is primarily due to the different ways the PRA requires capital adequacy to be calculated and in this context the large building societies are in a similar position to the main banks. ”

Moneyfacts did narrow down on 90% LTV 5-year fixes, concluding that building societies typically have a rate 0.72% lower.

At the time of writing the cheapest 60% loan-to-value 5-year fix for purchases on the market is from Principality Building Society at 1.65%; however eight of the next nine cheapest products are from banks.

With 90% LTV 5-year fixes for purchase Platform (part of The Co-operative Bank) is tied with Skipton as having the cheapest rate, though it has a lower fee. The only building societies in the top 10 list of the lowest rates are Skipton and Coventry.

Ishaan Malhi, chief executive of Trussle, was also critical of the study.

He said: “It’s a shame to see the myth of headline rates perpetuated in the mortgage market.

“When we wrap in all the extra fees and incentives linked to the mortgage products currently on the market, it is banks not building societies that turn out to be cheapest for borrowers.”

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