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Taking out a mortgage with your current bank could cost you thousands of pounds more than if you shop around.
Our research shows that mortgage applicants prioritise lenders they have existing relationships with, but this can be an expensive mistake.
Read on to find out more about the cost of loyalty, and why it's even more important than before to do your research before settling on a lender.
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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.
As part of our annual mortgage lender reviews, we asked more than 3,000 homeowners why they chose their current lender.
The most common reason was having an existing relationship with the bank or building society, for example holding a bank account or credit card with them. This was chosen by 27% of respondents.
Other popular reasons included the size of the monthly repayments (21%) and a recommendation from a friend or family member (20%).
Taking out a mortgage with your current bank might seem like the easiest option, but there's a good chance it'll cost you more.
Currently, there are around 5,000 mortgage deals on the market from more than 80 lenders, so it's highly unlikely that your current bank will offer you the very best deal.
Even small differences in rates can have a big impact on repayments. We've analysed how much difference 0.5 percentage points on your interest rate can make, using data from Moneyfacts.
The below example assumes you're buying a home for £246,000, the average price currently paid by first-time buyers, according to the Land Registry.
You're then taking out a two-year fixed rate mortgage at 90% loan-to-value, with a 25-year term.
| Initial rate | Monthly repayment |
| 4.9% | £1,281 |
| 5.4% | £1,346 |
As you can see, the deal at 5.4% costs £65 more each month than the one at 4.9%. That adds up to £1,560 over the initial two-year term.
If you're borrowing more, or taking out a longer mortgage term, this can total thousands of pounds.
Our mortgage lender reviews also highlight the importance of shopping around.
In addition to rating lenders on their customer service, we also analyse how competitive their deals are over a month-long period.
We found that the number of competitive deals on offer varied significantly between the big banks.
For example, HSBC, NatWest and Nationwide offered twice as many market-leading deals as Lloyds Bank, TSB and the Royal Bank of Scotland.
For the full results, check our guide on the best mortgage lenders.
When choosing a mortgage, it's important to consider the entire package, rather than just the headline rate.
Some lenders add big fees to their 'cheapest' deals. Once these are taken into account, the overall cost can be more than a deal with a higher initial rate.
Using a mortgage broker can be a good way to ensure you're getting the best possible deal, as they can compare products from almost all lenders to find you the most suitable one.
If you're a first-time buyer, shopping around is vital, but if you're remortgaging it's still worth checking how competitive your current lender's renewal offer is.
Your current provider already knows your financial history and repayment habits, while a new lender will need to conduct a full affordability check before approving your mortgage.
15% of respondents to our survey said overpayment options were a key reason they chose their lender.
However, this isn't something you should fret too much about when comparing deals, as the difference between lenders is usually minimal.
We found that 70% of current mortgage deals allow overpayments of up to 10% of the balance each year, while fewer than 10% of deals don't offer any overpayment options.
So while it's worth checking whether your lender allows you to overpay, this in itself shouldn't be a reason for choosing a specific lender or deal.
Cashback is another popular reason for choosing a mortgage: our research shows that 10% of people were drawn to this perk.
Some lenders offer as much as £1,000 in cashback, but you'll usually end up paying for the incentive – often via a higher interest rate.
Fees can also wipe out cashback. For example, we've found mortgages that come with £500 cashback but have an arrangement fee of exactly £500 more than their competitors.
Make sure you're not trading a lower rate, which could save you thousands over the life of your mortgage, for a one-off cash bonus.
Last week, the Office for National Statistics announced that inflation had dropped below the Bank of England’s 2% target for the first time since 2021.
The figure of 1.7% was lower than economists' predictions of a drop to 1.9%. As a result, there may now be a greater likelihood of further Bank of England base rate cuts in November and December.
This means mortgage rates are likely to be volatile over the coming weeks and months as lenders reprice their deals.
For borrowers, this emphasises the importance of shopping around and taking expert advice if you're unsure.
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