COMPETITION is intensifying in the mortgage market, where new-style banks, which have abandoned their time-honoured mutual status to become companies quoted on the stock market, must now earn profits to satisfy their investors. But there is a real danger that loyal customers, who do not want to move home or switch to another lender, will be seriously disadvantaged. Competition is healthy and usually to the benefit of customers, but the mortgage market is becoming increasingly complex and difficult to circumnavigate, even for professionals. With good independent financial advice you might just find the mortgage best suited to your financial needs from an array of cash-backs, fixed rates, variable rates, discounts for first-time buyers and new customers, and capped mortgages. There are pitfalls, such as arrangement fees, penalties for early redemption, and insurance ties.

Be sure that all the lenders are falling over themselves to win your business if you are a good risk. Inertia means that most of their customers will stay with them until they have no need of a mortgage or at least until they move home. Hence the growing range of incentives to enlarge the customer base. But once a borrower becomes a bread-and-butter customer, he will not be given any special treatment. Loyalty bonuses, where they exist, are minuscule compared with discounts and other incentives for new customers. Nobody minds reasonable discounts being given to first-time buyers, but when a new variable-rate customer, who is not a first-time buyer, is charged the better part of 2% per annum less over nearly five years than the customer of long-standing, then equity has taken a back seat to the need to attract business. If this sort of practice is allowed to continue the mortgage market will

become a jungle. Ultimately, more and more customers will learn to take their business elsewhere if they are being discriminated against. In the long-run only the legal profession can benefit from such an outcome.

Long-term savers have also lost out through the introduction of new accounts offering enhanced returns of which they were not aware, but some progress has been made in persuading financial institutions to notify customers of such changes. The most valuable asset enjoyed by building societies, past and present, was their good name - their reputation for treating customers fairly and for looking after those who remained loyal to them. Marketing hype in a highly competitive environment has somewhat diminished their image of decency. Now lending practices are being questioned. In the long-run mortgage providers will gain nothing if increasing numbers of borrowers decide they are being unfairly treated and take their business elsewhere. It is for banks and building societies to recognise this by becoming more even-handed in their practices.