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Existing mortgage customers refused best rates

Journalist: Joe Wright, Telegraph

ended 05. September 2024

Hello

At the Telegraph, we have a case study with £570,000 left on his mortgage, and 50% LTV, who is after a five-year fix. 

He has been offered a rate of 4.46% (with £995 fee) by NatWest, the lender his current deal is with.

However, new NatWest mortgage customers with 60% LTV are currently offered 3.71% (with £1,495 fee). This is currently a market-leading deal for five-year terms.

He argues this is unfair and that he is being penalised for his loyalty. He fits the bill for that product, but isn't offered it as he isn't a new customer.

Over the course of the next five years, the difference will cost him about £20,000 in interest.

He says there should be a dual pricing regulation, as there is with insurance, to prevent loyal mortgage customers getting blocked from the best rates. As a result of NatWest's lack of incentive, he will be shopping around for a better deal.

What do mortgage brokers make of this?

  • Is NatWest ripping off existing mortgage customers by not offering the best rates? 
  • Is this commonplace in the mortgage world? Or can exisitng customers be rewarded with exclusive deals?
  • Should the FCA look to address this issue and ensure lenders offer the best possible rates to existing customers?

Cheers, Joe

9 responses from the Newspage community

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Michelle Lawson
Director at Lawson Financial
Dual pricing has always been a thing with some lenders- sometimes it is in favour of direct business and sometimes in favour of the broker. This is nothing more than lender commercial strategy and the rates are usually not vastly different between channels. Natwest aren't doing themselves any favours at the moment due to a multitude of reasons however, some lenders have got the hang of customer retention and offer the same deals for both new and existing business. Situations like this raise the importance of speaking to a good whole of market broker who can compare the offerings for a small fee in comparison to the extra interest this person could pay. Lender loyalty rarely pays as you don't even get a cheap carriage clock any more and, in reality, you are nothing more than an account number or a market share statistic to keep shareholders happy.
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Jack Tutton
Director at SJ Mortgages
NatWest are not alone is specifically targeting new customers with preferential products over their existing mortgage customers, a number of other lenders prioritise generating new business rather than supporting customers that they already have. It is not uncommon for us to have conversations with clients where they have seen their lender offer a particular rate online only for it available to just new mortgage customers. People often believe that the best thing to do with their mortgage is to keep it with their existing lender, this pricing model takes advantage of this, it can cost people significantly should they not fully understand all the options available to them.
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Patricia McGirr
Founder at Repossession Rescue Network
After the direct selling debacle this is another own goal by NatWest showcasing their dual standards and a staggering lack of ethics. The ‘brand new customers only’ mentality of many major companies should be a thing of the past. Attracting new customers is important in any industry, but sacrificing the loyalty of existing clients is business hara-kiri. This demonstrates the key role played by brokers, who are best placed to put customers first in a fast-paced mortgage market.
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Aaron Strutt
Product and Communications Director at Trinity Financial
Mortgage lenders offer different rates to different customers and at the moment there is a push to offer cheaper rates to people buying a property rather than remortgaging. They are actually issuing different rates to customers switching lenders and then their existing customers switching rates. More of the lenders are using systems where they can offer individual pricing, meaning they can keep the lenders they want by offering them more attractive deals. This also means some borrowers will be offered higher rates if they want to stay. Product transfers make up such a massive part of the market now it seems highly likely the regulator is watching and monitoring the system. Before you accept the deal your bank or building society is offering you to stay, it is well worth assessing the mortgage market first and seeing if there is a better rate. Some lenders offer much cheaper rates than their competitors. This is important if you have a bigger mortgage or you take a long term fix. 
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Elliott Culley
Director at Switch Mortgage Finance
Unfortunately this is a common occurrence in the mortgage world and one that should be looked at. This is why it is always best to shop around if you can.
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Simon Bridgland
Director at Release Freedom
The fat juicy worm of a rate is only offered to new borrowers, would suggest Natwest want to get a larger share of the relatively small 2024 marketplace. The apparent dual pricing does go against the grain of Consumer Duty and should have been laid to rest long ago, but thats market trading in the mortgage world, to get an edge on the competition lenders will offer deals for new blood. Brokers feel Natwest are also sticking two fingers up to them by having different rates for different folks, as some rates from time to time are not available through brokers and only via direct channels.
The appealing rate of 3.77% is a market leader and the lender is banking on a good number of borrowers flocking to their coffers, which is understandable. So when a loyal customer is treated seeming unfairly, hackles will come up. Natwest, like a few others, do hide their existing customer rates so they are clearly not proud of them.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
NatWest, along with Halifax and Santander, have chosen to remove their existing customer deals from the sourcing systems brokers use and instead offer "bespoke" pricing for these borrowers. Many brokers have raised concern at this latest tactic as it removes transparency and allows lenders to offer more expensive deals to those they feel are less likely to leave, penalising the most loyal borrowers. In insurance it was called "price walking" and a recent look at that market by the FCA resulted in them banning the practice, stating that people that present an equal risk should receive an equal price, stopping new customers getting better deals than loyal ones. It seems that no sooner have insurers been banned from the practice, that lenders appear to be starting to use it. Fingers crossed that the FCA steps in quickly and puts a swift end to this before it becomes any more widespread.
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Iain Swatton
Director at Exemplar Financial Services
This situation with NatWest isn't surprising, as they have a history of not prioritising customers. Offering existing customers higher rates than new ones, despite their loyalty, is a clear example of this. It underscores the importance of clients working with a whole market of mortgage brokers who can search the market for better opportunities. If a lender isn't loyal to its customers, those customers shouldn't feel obligated to stay loyal to the lender.
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Darryl Dhoffer
Founder at The Mortgage Geezer
NatWest hightailing it with the gold, leaving loyal customers in the dust? While the difference in rates might feel like a sucker's deal, its not always black and white. You see, the mortgage market is a rough and tumble place. Lenders are always jockeying for position, and sometimes, that means offering sweeter deals to newcomers. It's a way to draw them in, like a saloon owner offering free drinks to strangers. But that don't mean it's fair play for those who've been a loyal customer in the saloon!
Now, the FCA, they're the sheriffs of the mortgage market. If they see folks getting a raw deal, they might step in and put a stop to it. But remember, they wont dictate the price of anything. It's up to the borrower, to do their due diligence and find the best deal they can, idealy with a whole of market mortgage advisor.
So, next time you're in need of a mortgage, don't just settle for the first offer that comes along - haggle a bit and get the best deal from the Wild West of Lenders.