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.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article