Lenders add restrictions to top mortgages

THERE has been a growing trend over the last year for larger home loan companies to offer exclusive mortgage deals to existing customers. Go to a lender's website and you will often see a selection of mortgages restricted to their existing mortgage borrowers.

Increasingly, certain mortgages are being limited to lenders' current account customers, for example, and in some cases the rates are differentiated between current account type - with packaged current accounts (the ones you pay a monthly fee for) offering the most competitive deals.

Defaqto's analysis has found there are currently about 3,200 different residential mortgages available and 22 per cent of them are restricted to existing customers. Around 11.8 per cent of these mortgages are restricted to the lender's current account customers, 9.3 per cent to lenders' existing mortgage borrowers and 1.2 per cent are for existing members or savers.

Two years ago only 9 per cent were restricted to existing customers and the vast majority of these were for existing borrowers.

Loans restricted to current account customers are typically charged at between 0.05 per cent and 0.2 per cent below the lender's generally available standard rate. In some instances fees may be reduced instead or other incentives offered.

Barclays has a range of loyalty mortgages for those with an active Barclays current account that has been credited with at least 800 in each of the last three months.

An example is their two-year fixed rate mortgage at 70 per cent loan-to-value, which has a 999 fee with a rate of 3.15 per cent or, for its current account customers, 2.95 per cent .

Halifax offers its current account customers a discount of at least 0.2 per cent on new mortgages.

Borrowers seeking a two-year fixed rate mortgage with a 20 per cent deposit would currently have to pay a rate of 3.49 per cent. The standard fee is 399, but that is reduced to 199 for HSBC Advance current account customers or to 99 for HSBC Premier Current Account customers.

Nationwide Building Society has a range of mortgages that are restricted to their FlexAccount customers that will permit borrowing up to 90 per cent.

Royal Bank of Scotland, meanwhile, has a range of 70 per cent mortgages that are restricted to their packaged current account customers.

Santander offers home movers requiring a 75 per cent loan a four-year fixed rate of 4.75 per cent. The fee is 495 for existing Santander borrowers, as opposed to 995 for everyone else.

As we've seen, mortgage deals restricted to current account customers are becoming increasingly common, but there are variations on the theme so it's important to check the details thoroughly.

The lowest mortgage rates tend to be restricted to those seeking to borrow no more than 75 per cent of a property's value. A significant premium still has to be paid for, say, a 90 per cent mortgage.

It becomes increasingly difficult to find a lender for bigger loans and, in many instances, the only remortgage deals available will be with the borrower's existing lender.

"Existing borrower only" mortgages are certainly worth looking at for those seeking to remortgage, and in recent months there have been some very competitive deals. This is especially the case for those with smaller deposits when compared with the generally available equivalent.

It is certainly worth looking at any exclusive mortgage deals available from your lender for existing customers, but given that your mortgage will almost certainly be an expensive and long-term commitment it is always worth scouring the market to ensure you get the most appropriate deal for your circumstances.

Kevin Bray is insight analyst for banking at the financial research company Defaqtov