At last loyalty is being repaid - but shopping around is still crucial

Published on Thursday 2 September 2010 17:17

Barclays this week followed similar moves from HSBC, Nationwide Building Society and Santander in launching a range of discounted mortgage rates specifically for its existing current account customers.

From 1 September, Barclays trimmed its fixed, tracker and offset mortgage rates by up to 0.54 percentage points for customers who have a current account and have paid in at least 800 in each of the three months before submitting their mortgage application.

There's no question that Barclays is offering a generous discount with some of the repriced deals currently featuring at the top end of the best-buy tables.

The discount on the two-year fixed rate mortgage offered by Barclays, available on a loan-to-value (LTV) of 70 per cent, is probably the best of the bunch, cutting the rate to a very competitive 2.95 per cent, with a 999 fee.

This gives the equivalent HSBC two-year deal a close run for its money at 2.99 per cent, which comes with a lower fee of 399. However, there is also a third option to take into consideration from Yorkshire Building Society, which offers a rate of 2.89 per cent with a 995 fee for borrowers with a deposit of at least 25 per cent.

Other examples include the Barclays two-year 4.19 per cent fix for customers needing to borrow to 80 per cent LTV, with a 999 fee, although the Post Office is offering 3.94 per cent for a feee of 995 and at a higher LTV of 85 per cent.

Similarly, if you're looking at a five-year fix, the discounted rate of 4.44 per cent for borrowers needing 70 per cent LTV, which comes with a 999 fee, is beaten by Yorkshire Building Society (4.19 per cent at 75 per cent LTV, with a 495 fee).

There's a growing trend of banks seeking to reward existing customers and cross-sell more products by using reduced rates or fees as an incentive. However there is a danger that this model will see an already depleted broker market suffer further as fewer people bother to shop around for their home loans.

It's good that providers are tending to the needs of existing customers rather than focusing their efforts on trying to entice new business.

Although this move from Barclays is welcome, borrowers should still seek independent professional advice rather than assuming that a loyalty offer will always be the most cost effective option for their mortgage. At a time when lenders are rejecting borrowers without squeaky clean credit records, advice from a broker with knowledge of the market can be invaluable.

Although it's refreshing to see another high street bank giving something back its loyal customer base by way of better value products, price will never be the be all and end all.For the relationship to remain a long and fruitful one, for both sides, it's vital that customer service standards live up to expectations too.

• Andrew Hagger is head of communications at Moneynet.co.uk