Mortgage lenders rewarding loyalty
When a mortgage term reaches its end, most homeowners know they’ll get a raw deal from their existing lender, but things are changing as lenders actively seek to retain existing customers.
Staying with one mortgage lender for the life of your mortgage has always been a rarity. Homeowners are often given little choice but to remortgage to take advantage of more competitive deals. It’s a source of frustration for many, who don’t want the hassle of remortgaging, yet can’t get a good deal with their existing lender; despite the fact, their lender can offer attractive incentives and lower rates to first-time buyers.
However, some banks and building societies are finally recognising the benefits of keeping good customers. Customer loyalty, it seems, does have a value and homeowners may find that they are being offered ‘under the counter’ deals to stay with their existing lender.
An end to the ‘loyalty penalty.’
The ‘loyalty penalty’ has historically impacted all home loan customers who at the end of a fixed–term deal are automatically moved to their lender‘s standard variable rate. Customers can then end up paying thousands of pounds more than they need to unless they proactively seek a better remortgage deal with another lender.
Lenders are finally more likely to try and entice existing borrowers to stay with them with an ‘under the counter’ deal, offering the best interest rate or slashing remortgage fees for existing customers, and setting up a product transfer rather than waving a good customer goodbye.
1.19 million borrowers opted to stay with their existing lender
According to UK Finance, last year twice as many borrowers stayed with their existing mortgage provider as switched to a new one, and the trend is increasing. In Oct-Dec 2018, 331,500 homeowners chose to stay with their current lender with a product transfer deal, compared to 291,900 in the previous quarter.
If you’re an existing Newcastle Building Society customer, you could benefit from a rate of 2.39% for a five-year fixed deal, compared to 2.59% offered to new customers. Coventry Building Society offer a reduced rate on their two-year deal to current borrowers, and Family Building Society and Cambridge Building Society are both offering the same rate to all customers, but reduced fees to existing borrowers.
While there are no guarantees that an existing lender can offer a better deal than remortgaging with a different provider, it’s certainly worth exploring the possibility.