When people are looking for a new home owner loan or mortgage, in many cases they just go to the high street and see what the large banks and building societies have to offer on their loan deals…big is beautiful, right?

But it may be of financial benefit to look at the smaller lenders and loan companies at the moment according to one Independent Financial Adviser (IFA), particularly due to the recent falls in the cost of borrowing money on the wholesale markets.

The latest swap rates, the rate at which banks and building societies borrow funds to be able to offer loans, have fallen in the last week or so and it seems more likely that the small independent banks and building societies are more likely to pass on these savings to their new loan customers than the large high street giants are.

Large lenders typically borrow funds in large tranches, which means that if they already have funds in reserve, they will not benefit from the cheaper rates, whereas a small lender is more likely to only borrow small amounts at a time and therefore will benefit from the reduction in swap rates at the moment.

The other factor, is that many of the smaller lenders are mutual societies and therefore do not have shareholders to pay out, or have not got themselves into the same financial mess as many of the large banks and therefore do not need to restore their balance sheets.

All these factors mean that small building societies are in a better position financially, than many of the large high street institutions, to be able to offer cheap loan deals to their customers.

Many of these small lenders are regional, but may be accessed by intermediaries and loan brokers, which adds strength to the argument that anyone looking for a new cheap loan should seek independent financial advice first.