Egg borrowers shell out least, but Abbey habit's costly

Egg, HSBC and Nationwide have come out top in a new survey looking at which mortgage lenders offer best value when it comes to how much they charge their standard variable rate borrowers.

The figures, from financial data provider Moneyfacts, reveal that over the past 12 months a typical Egg standard variable rate mortgage-holder has paid out £553 less than an equivalent borrower with Abbey National, Britain's second-largest lender. Over three years the difference adds up to a hefty £1,600.

The survey allows borrowers to see at a glance how much their interest payments are costing them, and highlights the sizeable savings that can be made. But because it only focuses on lenders' standard variable rates, it is arguably irrelevant to the several million people who are on special deals such as fixed rates or discounts and who don't intend hanging around on the standard rate.

Moneyfacts analysed the UK's top 35 mortgage lenders and looked at the total interest someone with a £50,000 standard rate mortgage would have forked out over the past year - from January 1 until December 31. It also looked at 2000 and 1999 in order to produce a three-year total.

Over one year, online bank Egg came out cheapest with a total annual interest bill of £2,978. Egg's standard rate is currently a very competitive 4.74%. In second, third and fourth place respectively were HSBC (£3,000), Nationwide (£3,020) and Standard Life Bank (£3,139). Six of the top 10 cheapest lenders were building societies -the other five apart from Nationwide were the Yorkshire (£3,240), Principality (£3,280), Portman (£3,329), Derbyshire (£3,363) and Chelsea (£3,371).

However, if loyalty rates offered by some lenders to their long-standing borrowers are taken into account, the Cheshire, West Bromwich and Coventry building societies also scored highly. These three all offer lower rates to bor rowers who have been with them for more than five years.

Propping up the bottom of the table was high street giant Abbey National, which had a total annual interest bill of £3,531. This figure is based on a £50,000 borrower on Abbey's "old" standard variable rate (currently 6.1%), which is being paid by almost 500,000 people.

Abbey will doubtless be at pains to point out that many of these people are free to switch immediately to the new lower tracker rates it launched earlier this year, which are currently 4.9% and 5%, a move that would save many of them hundreds of pounds a year.

Second-from-bottom were Cheltenham & Gloucester, part of Lloyds TSB, and Alliance & Leicester, each of which came in with a total annual interest bill of £3,519. Other poor performers include The Mortgage Business (£3,515), Bank of Ireland Mortgages (£3,512) and Woolwich (£3,510). The Halifax came in at a not- very-impressive £3,496, though again this is based on the bank's "old" standard variable rate (currently 5.75%) rather than its controversial new standard rate (5%). Quite a few of the people on the old standard rate are free to switch over to the lower rate, though they will have to ask to be moved.

Egg was also the cheapest lender when the three-year period from January 1 1999 to December 31 2001 was looked at. Egg would charge a total annual interest bill of £9,300 - some £1,651 less than the £10,951 that the most expensive lender, Bank of Ireland Mortgages, charged over the same period. Other lenders that came in below £10,000 include Nationwide and Direct Line.

Melanie Stewart at Moneyfacts says: "Borrowers can make significant savings by looking at how much their interest payments are costing them. Over the 25-year term of a mortgage this could run into several thousand pounds."

Because the survey focuses on what people on the standard rate pay, it is seen as a good indicator of which lenders play fair over the medium to long term.

But David Hollingworth at mortgage broker London & Country says people need to view the findings with some caution.

He says that by focusing exclusively on lenders' standard variable rates, the survey doesn't give the full picture, and points out that the current intense competition in the mortgage market means there are deals around that could mean people paying a lot less than even the very lowest standard rates.

For example, Darlington building society is offering a loan giving a 2.25% discount off the variable rate until March 31 2004, which means a current pay rate of just 3.49%. There are early redemption penalties until March 2004 and you must pay your own legal fees and valuation costs. You also need to stump up a deposit of at least 10%.