Does Loyalty Pay When It Comes to Mortgage Rates?

Do banks offer better mortgage rates to existing customers?

More than a quarter of mortgage holders applied for their mortgage through their bank because they already had an existing financial product with them, such as a current or savings account. Sticking with an existing provider can seem like the easiest option, but most lenders do not offer better mortgage rates to existing customers. While a product transfer (switching to a new mortgage deal with your current provider) is often easier than remortgaging to a new lender, there is also no guarantee that your product transfer will be approved, even if you’re a long-standing customer.  

This is because the mortgage rate you are offered isn’t typically based on customer loyalty. Instead, it’s based on your affordability, including how much equity you hold in your property, your household income and outgoings, as well as other factors like your credit score. 

There are some mortgage lenders which reward current or savings account holders for applying for a mortgage with them, but choosing one of their deals could leave you thousands of pounds worse off than if you chose a different provider with a better deal. 

Learn more: What to do if your mortgage application is declined

Which banks pay loyalty mortgage rates and rewards?

Some lenders, such as Virgin Money, Yorkshire Building Society and Barclays, reward existing savings customers who apply for a mortgage with them. But choosing one of their deals could see you missing out on a better mortgage rate from a different provider, and there’s no guarantee you will be offered preferential rates by the lender. There are thousands of mortgages available on the market, as well as budget-boosting schemes which could help you increase your buying budget.

For example, Yorkshire Building Society offers cashback to some existing customers who apply for a mortgage with them. If you’re a Yorkshire Building Society member and you’ve held a savings account with them for at least 12 months, you could earn an additional £250 cashback on top of any cashback that already comes with one of their eligible mortgages. But to see if this is worth doing, you’ll need to look at the full cost of the mortgage. It could be that choosing a mortgage with them will be more expensive overall, even when you take into consideration the cashback available.

How much can I save by shopping around?

If there’s only a small difference between your bank’s best rate and the best mortgage rates from other providers, you might be tempted to stick with the one you know. But before you submit your mortgage application, see how much you could save by switching to a new lender.

Let’s imagine you want to borrow £250,000 and your bank offers you a mortgage rate of 4.5% over 30 years.

If you accept their offer, your monthly repayments will be £1,266 a month - meaning you’ll pay £205,811 on interest over the 30-year term. 

But if you compare deals from across the market and find a lender willing to lend you the same amount at 4%, your monthly repayments will drop to £1,193 a month. 

Not only will you save £73 a month on the cheaper deal, you’ll also spend £179,466 on interest over the 30 year term. That’s £26,345 less than you would on the deal from your bank!

How to find the best mortgage deals

Our mortgage calculator can give you a good idea of the mortgage rates available, but for a personalised recommendation create a Tembo plan. Complete our short fact find and in 10 minutes we’ll send you a free, detailed breakdown of all the mortgage options available to you, including broker-only deals and affordability-boosting schemes. We’ve helped thousands of remortgagers and buyers discover how they could overcome common affordability obstacles and get the best rate for them - or even borrow a bigger mortgage.