Revealed: The six 'secret' lenders claiming to offer better mortgage deals than high street banking giants

By Neil Simpson, Financial Mail On Sunday

PUBLISHED: 17:27 EST, 1 February 2014 | UPDATED: 04:39 EST, 4 February 2014

Nearly eight out of ten mortgages are issued by just six big lenders – raising fears that a lack of competition means borrowers are paying more than they need for their loans.

But while the high street names say they give customers what they want, a ‘secret six’ group of rivals claims to offer better deals and service, and a lot more flexibility.

The secret six are starting to show up increasingly often on best-buy charts from independent brokers such as London & Country Mortgages in Bath and John Charcol in London.

Enlarge   Fixed: Luke O'Neill is delighted with his five-year Metro Bank deal for his new flat

Fixed: Luke O'Neill is delighted with his five-year Metro Bank deal for his new flat

They are made up of less well known names such as Accord, Investec and Metro Bank, as well as firms not widely recognised for offfering mortgages – such as Scottish Widows, Virgin and Tesco.

Here is what they offer.

 

More...

SCOTTISH WIDOWS

Special deals for ‘professional’ workers – notably accountants and actuaries, doctors, dentists and optometrists, teachers, vets, barristers, solicitors and engineers. Its application process is designed to take younger applicants’ ‘career paths’ into account when it works out how much it can lend.

How I avoided computer ‘no’

Educational consultant Luke O’Neill (pictured above) chose a new lender because he didn’t want to risk refusal from a more traditional player when he moved from Suffolk to London last year.

‘Some of my income comes through performance bonuses, and high street lenders are less likely to take that into account,’ he says.

He was worried that if he fell into the ‘computer says no’ trap and got turned down for the loan, this would be recorded on his credit file – making it harder to get a mortgage elsewhere.

Luke, 27, approached Metro Bank, which looked at his whole income rather than just his basic salary.

As he had a decent deposit, having already sold his previous property in Bury St Edmunds, he got a five-year fix at 3.35 per cent for a two-bedroom flat in a Victorian building in North London last October. ‘I’m happy with the rate but I was even more pleased by the way the process worked,’ he says.

So while it sets a guide of four times salary for those on up to £30,000, and up to five times salaries of £50,000 or more, it can bear likely wage rises in mind for individual lending decisions.

It also aims to help the self-employed in its key professional fields and offers offset mortgages linked to a savings account – useful for those who save for large annual tax bills. If you’ve got just a 10 per cent deposit or equity you can get a two-year fix from 4.49 per cent while the rate falls to 1.79 per cent if you have 40 per cent equity.

INVESTEC

One of the few lenders to still offer interest-only terms on new loans – most other lenders have outlawed these as part of ‘safer lending’ requirements.

The deals are available only to high earners who apply through a broker, who may charge a fee. The broker has to explain that while interest-only deals are far cheaper each month, the capital will ultimately have to be repaid. If you pass the tests you can fix for three years at 3.19 per cent with a 25 per cent deposit or equity.

ACCORD

A good option for self-employed borrowers whose incomes are harder to prove. It can also take a more sympathetic view towards anyone who has had past credit problems. It is part of Yorkshire Building Society – the second biggest society after Nationwide – and aims to offer rates its parent couldn’t afford to provide through its entire branch network. 

You can apply only through a broker – again watch for fees – and you might need professional help finding your way through its product range.

It currently has nearly 50 different rate and fee combinations for two-year fixes alone. These range from 1.99 to 5.49 per cent depending on the fee you decide to pay and how much deposit or equity you have.

 

METRO BANK

HAS gone back to basics and individually assesses each mortgage application rather than relying on computers. Fans say it allows people to get loans if their circumstances are in any way unusual. Its latest best-buys include two-year fixes from 2.69 per cent and five-year fixes from 2.99 per cent. It also helps big borrowers wanting million pound-plus loans.

VIRGIN MONEY

Trying to make a name for itself by focusing on interest rates. It has featured in best-buy charts for the past year and it is one of the few lenders to offer three as well as two and five-year fixes. Its lowest three-year deals start at 2.4 per cent while five-year fixes start at 3.05 per cent.

TESCO BANK

Also trying to carve out a slice of the mortgage market. It is focusing on mainstream borrowers who make up the supermarket’s core customer base. Low overheads – with deals done online and on the phone – have helped it offer keen rates. It currently has five-year fixes from 2.99 per cent – and while it shouldn’t be enough to swing a mortgage decision it also gives clubcard points on each monthly repayment.

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most rates quoted are the flat rate not the APR which is the actual cost/rate

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Why is a "best mortgage deal" always one that involves FIXING the rate way above where the actual base rate has been these past 5 years? Let's hear about where you can get 95% mortgages, 100% mortgages, Bank of England base rate trackers, and lifetime trackers please..... Fixes when the base rate isn't going anywhere are nothing more than a leech of one's mortgage payments - money straight into the pockets of banks who know full well that interest rate hikes are still a long way off. When fixes are being removed from the market like trackers were after the credit cruch - THAT'S when to consider "fixing" - and not before.

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did anyone mention what the set up fee is?

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If finance houses can fix a pension for 25 years or more, they should be able to fix a mortgage for just as long.

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Variable-rate and short-term-rate mortgages should be outlawed. They bring uncertainty and unpredictability to the biggest financial risk most people will ever take. Only fixed or capped rates over 5+ years should be allowed by law. They give stability and allow you to plan with certainty. Variable rates are gambling. Fixed rates are planning and investing. A much more grown-up approach.

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Absoulte rubbish..... I have a great base rate tracker mortgage and have enjoyed many years of paying an absolute pittance in interest.

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I think people need to think a little out of the box. I just changed from a 2 year fixed to a lifetime tracker. I had 13 years remaining and have reduced it to 11 - my way of overpaying. Anyway... To some going for a lifetime tracker is foolish because at any time interest rates could increase. I'll explain why I did. 1. At any time I can switch to a fixed with no penalty. 2. I can overpay any amount with no penalty. 3. The rate I got for 75% LTV was........ 1.49% (0.99% over BoE Rate) Now consider this... What are the chances that rates will increase by 2% to bring my tracker to 3.49%? Sure it will happen one day but with the risks to the market, I can't see it reaching those levels for at least 2-3 years. By that time I will have enjoyed a great rate, overpaid to reduce my LTV, and be in an ace position to get a better deal. Yes, the fixed rates will have gone up too... But that lower rate allows me to save more - and pay off other debts quicker. 1.49% wins. I'm with Santander

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Hi Sue I got this 3 weeks ago. I just called Santander up and arranged it over the phone. I was already with them, so that might have helped...but if you can get even just 2% for a lifetime with the freedom of changing to another deal whenever you want - then it's great.

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Really - 3 weeks ago. What is the deal called?

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I think people need to think a little out of the box. I just changed from a 2 year fixed to a lifetime tracker. I had 13 years remaining and have reduced it to 11 - my way of overpaying. Anyway... To some going for a lifetime tracker is foolish because at any time interest rates could increase. I'll explain why I did. 1. At any time I can switch to a fixed with no penalty. 2. I can overpay any amount with no penalty. 3. The rate I got for 75% LTV was........ 1.49% (0.99% over BoE Rate) Now consider this... What are the chances that rates will increase by 2% to bring my tracker to 3.49%? Sure it will happen one day but with the risks to the market, I can't see it reaching those levels for at least 2-3 years. By that time I will have enjoyed a great rate, overpaid to reduce my LTV, and be in an ace position to get a better deal. Yes, the fixed rates will have gone up too... But that lower rate allows me to save more - and pay off other debts quicker. 1.49% wins. I'm with Santander.

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Hope these secret six banks do well as the big six are very greedy and were the part of the collapse in 2007/8. They are to big to fall and have a monopoly and should be broken up to give us better competition.

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