Finally! Mortgages that reward loyalty: Renewal customers offered 'under the counter' deals

Homebuyers wanting to stay loyal to their existing mortgage provider when their fixed-term rate ends are finally being rewarded with better deals than those being offered to new customers.

It seems that banks and building societies have at last woken up to the benefits of retaining good customers and — in return for their loyalty — are offering existing customers the best interest rates or are slashing fees when they come to remortgage.

Often, these deals are not advertised but are offered ‘under the counter’ to borrowers whom lenders fear may switch away.

Existing Coventry Building Society customers can get a two-year deal at 1.55 per cent, while new customers will pay 1.59 per cent — a £72 saving in two years

Shaun Church, director at mortgage broker Private Finance, says: ‘There has been a seismic shift towards retaining mortgage clients, which is why many existing borrowers can now enjoy the same rate as a client who has just walked through the door.

‘Lenders have woken up to the logic that if you have a good customer who makes their payments regularly, then why wouldn’t you want to retain them, particularly if you’ve already spent money to market to them?

‘New clients can present an unknown risk, while also costing money to attract and set up from an admin perspective.’

But borrowers who need to remortgage are being urged not to stop shopping around. Just because they are being offered their lender’s best rate, it does not mean it’s the best on offer.

David Hollingworth, of brokers L&C Mortgages, says: ‘There is still a good chance that lenders in the open market will offer something more competitive, so any offer from the existing lender should always be held up against rates in the open market.’

For example, Virgin Money offers the same 1.72 per cent two-year rate with a £995 fee to new and existing customers with a 40 per cent deposit. But Lloyds offers 1.43 per cent with a £999 fee — saving £493 over two years with a typical mortgage.

Homebuyers should be aware that if they switch to a new lender, they will need to pass its affordability checks.

Product transfer deals may be particularly attractive if your circumstances have changed since you first took the mortgage, as you avoid having to prove again that you can afford the loan. 

The process will be much quicker, too.

However, you will only be eligible for a product transfer deal if you do not need to make changes to the terms of your mortgage. If you need to borrow more, you will have to apply for a new deal.

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