By clicking a retailer link you consent to third-party cookies that track your onward journey. This enables W? to receive an affiliate commission if you make a purchase, which supports our mission to be the UK's consumer champion.
When searching for a mortgage, your attention might immediately be drawn to the biggest high street banks, but building societies may offer cheaper rates and better customer service.
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.
Find the right mortgage using the fee-free service provided by L&C Mortgages
Compare mortgagesIf you click on the link and complete a mortgage with L&C Mortgages, L&C is paid a commission by the lender and will share part of this fee with Which? Ltd helping fund our not-for-profit mission. We do not allow this relationship to affect our editorial independence. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
Building societies offer cheaper-than-average rates for first-time buyers at both 90% and 95% loan-to-value, according to Moneyfacts.
The table below shows how deals from building societies compare with the overall market.
| Loan-to-value | Type of mortgage | Average rate (building societies) | Average rate (all lenders) |
|---|---|---|---|
| 90% | Two-year fixed-rate | 5.76% | 6.20% |
| 90% | Five-year fixed-rate | 5.18% | 5.67% |
| 95% | Two-year fixed-rate | 6.03% | 6.15% |
| 95% | Five-year fixed-rate | 5.47% | 5.66% |
However, the above figures don't mean that deals from building societies are market-leading, as the biggest banks do offer cheaper rates in some scenarios.
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.
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.
| Building society | Proportion of UK mortgage lending |
|---|---|
| Nationwide | 12.5% |
| Coventry | 2.9% |
| Yorkshire | 2.7% |
| Skipton | 1.4% |
| Leeds | 1.3% |
| Principality | 0.5% |
| West Brom | 0.3% |
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 which limit lending to their local area*.
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.
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:
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.
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.
Only three providers received five stars for overall customer service, and all were building societies, namely Nationwide, Skipton and Yorkshire.
All three brands also achieved full marks for their transparency on charges and penalties, and each was named a Which? Recommended Provider.
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.
It's sometimes said that if you have a small deposit or a complicated financial situation (for example you're self-employed or have credit issues), a smaller building society might look more favourably upon your application.
However, you might find it more useful to take advice from a mortgage broker, who can look at the criteria used by different banks and building societies to find you the right deal for your circumstances. A good broker will also walk you through the application process step-by-step.
Find the best deals, avoid scams, and grow your savings with our expert guidance. From only £4.99 a month.
Join Which? MoneyCancel anytime.
*Correction: this article was updated on 17 May 2024 to remove the following information: 'For example, Cumberland limits deals to customers in Cumbria, south-west Scotland and North Lancashire.' Cumberland Building Society offers mortgages in England, Scotland and Wales.
Which? Limited is registered in England and Wales to 2 Marylebone Road, London NW1 4DF, company number 00677665 and is an Introducer Appointed Representative (FRN 610689) of the following:
1. Inspop.com Ltd for the introduction of non-investment motor, home, travel and pet insurance, who are authorised and regulated by the Financial Conduct Authority (FCA) to provide advice and arrange non-investment motor, home, travel and pet insurance products (FRN310635). Inspop.com Ltd is authorised and regulated by the Financial Conduct Authority (FCA) to provide advice and arrange non-investment motor, home, travel and pet insurance products (FRN310635) and is registered in England and Wales to Greyfriars House, Greyfriars Road, Cardiff, South Wales, CF10 3AL, company number 03857130. Confused.com is a trading name of Inspop.com Ltd.
2. LifeSearch Partners Limited (FRN656479), for the introduction of Pure Protection Contracts and Private Health Insurance, who are authorised and regulated by the FCA to provide advice and arrange Pure Protection Contracts and Private Health Insurance Contracts. LifeSearch Partners Ltd is registered in England and Wales to 3000a Parkway, Whiteley, Hampshire, PO15 7FX, company number 03412386.
3. HUB Financial Solutions, for the introduction of equity release advice, who are authorised and regulated by the Financial Conduct Authority (‘FCA’) to provide advice and guidance on financial products for those who have retired or are approaching retirement (FCA Firm Reference Number: 455713). HUB Financial Solutions is registered in England and Wales to Enterprise House, Bancroft Road, Reigate, Surrey RH12 7RP, company number 05125701.
4. Alan Boswell Insurance Brokers Ltd (FRN 301), for the introduction of non-investment landlord insurances, who are authorised and regulated by the Financial Conduct Authority to provide advice and arrange insurance contracts. Alan Boswell insurance brokers Ltd is registered in England at Prospect House, Rouen Rd, Norwich NR1 1RE, company number 02591252.
Other financial services:
Mortgage service provided by London & Country Mortgages (L&C), Unit 26 (2.06), Newark Works, 2 Foundry Lane, Bath BA2 3GZ. London & Country are authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
We do not make, nor do we seek to make, any recommendations or personalised advice on financial products or services that are regulated by the FCA, as we’re not regulated or authorised by the FCA to advise you in this way. In some cases, however, we have included links to regulated brands or providers with whom we have a commercial relationship and, if you choose to, you can buy a product from our commercial partners.
If you go ahead and buy a product using our link, we will receive a commission to help fund our not-for-profit mission and our campaigns work as a champion for the UK consumer. Please note that a link alone does not constitute an endorsement by Which?.
