Halifax shamed over mortgage interest

Two sister companies of the Halifax have been named Britain's most expensive major mortgage lenders in a survey published today.

It reveals that the specialist lenders the Mortgage Business and Bank of Scotland Mortgages charge some of their standard rate home loan customers hundreds of pounds more a year than rivals.

At the other end of the spectrum, Egg and HSBC offer the best value for standard variable rate borrowers.

The figures, from financial data provider Moneyfacts, reveal that over the past 12 months an Egg customer with a £100,000 standard variable rate mortgage has paid out £1,160 less than an equivalent borrower with The Mortgage Business or Bank of Scotland Mortgages.

The survey of Britain's top 35 mortgage lenders lets borrowers see at a glance how much their interest payments are costing them, and shows the savings that can be made by switching deals. But it only shows the annual bill for people on standard variable rates (SVRs).

Moneyfacts looked at the total interest someone with a £100,000 standard rate mortgage would have forked out in interest between July 1 last year and June 30 this year. Online bank Egg came out cheapest at £5,697.

Egg has about 40,000 mortgage borrowers and its SVR is currently 5.74%. A spokesman says it is a tribute to the bank's "long-term good value pricing" that it has regained the title of best-value mortgage provider.

However, Egg doesn't tend to feature in the best-buy tables because its special deals aren't particularly competitive. It is currently offering a deal where what you pay is fixed at 5.49% for two years - yet the Newcastle and Portman building societies are offering two-year fixed rates priced way below this, at 4.38% and 4.39% respectively.

HSBC came second in the survey, with a total interest bill of £5,704. It had topped the previous two surveys.

In third, fourth and fifth place respectively were First Direct (£5,915), Intelligent Finance, the Halifax's phone and online bank (£5,915), and Nationwide building society (£5,947).

At the very bottom of the table were The Mortgage Business and Bank of Scotland Mortgages, which are both part of the combined Halifax-Bank of Scotland group. Both had total interest bills of £6,857.

Other below-par performers include Northern Rock (£6,797 - this is the rate paid by borrowers who have been with the society for less than seven years. Those who have been customers for longer get better rates).

Britain's biggest mortgage lender, the Halifax, came in at £6,707 - a hefty £792 more than its Intelligent Finance subsidiary charged.

The top half of the table is once more dominated by building societies and telephone and/or internet-based lenders, says Moneyfacts, which publishes the survey twice a year.

Darren Cook, head of mortgages at Moneyfacts, says the amount of interest payable on a £100,000 mortgage has gone up by an average of £401 since the last survey was issued in January. This reflects the 0.25% Bank of England base rate increase in August 2004.

The fact that the survey focuses on what people on the standard rate pay rather than including special deals, means it can provide a good insight into which lenders play fair over the medium to long term and offer good value to those customers who stay put.

However, millions of mortgage-holders spend little or no time paying their bank or building society's standard rate. They hop from one competitive deal to another.

Melanie Bien at mortgage broker Savills Private Finance says the general advice is that you shouldn't be on a lender's standard rate because you'll nearly always pay less by opting for a fixed-rate, discount or base rate tracker loan.

"Once you come to the end of a deal you should shop around and find another one so you're not stuck on the SVR," she says.

A spokesman for Halifax-Bank of Scotland says the Mortgage Business and Bank of Scotland Mortgages are specialist firms which tend to deal with higher-risk customers such as the self-employed and buy-to-let investors.