Mortgage discounts for certain loyal customers are becoming a bigger feature of the home loan market.
Many banks will give you a better mortgage rate if you sign up to their premium products which often require a fee – or you to deposit thousands of pounds a month.
Whether such deals are right for you will depend on your circumstances. Here’s how you can ensure that you’re able to get them and whether they are worth it.
What are relationship-based mortgages?
Relationship-based mortgages – where banks offer cheaper rates to customers that have other products open with them – have always existed, but brokers say lenders are now using them more widely.
Most commonly, some banks will only give their lowest rates to customers who have certain current accounts with them.
“While relationship-based products have existed for some time, lenders are now placing far greater emphasis on them,” says Nicholas Mendes, mortgage technical manager at John Charcol brokers.
“Rather than competing purely on headline mortgage rates, many are using current accounts, broader customer relationships, and home energy efficiency as ways to attract and retain clients beyond the mortgage alone.”
Some banks offer green mortgages with preferential deals given to those with better energy efficiency ratings.
What exclusive deals do banks offer?
Club Lloyds. Lloyds offers some of its cheapest mortgages to members of its Club Lloyds scheme. For example, it offers a two-year fixed rate as low as 3.47 per cent – the cheapest available on the market – for those with a 40 per cent deposit or equity in their home. It also offers a 3.52 per cent deal for those with a 25 per cent deposit, with both deals involving a £999 arrangement fee.These products are only available to Club Lloyds current account holders, although borrowers can apply as soon as the account is opened. Without being a Club Lloyds member you pay more, as its cheapest mortgage is 0.1 percentage points higher at 3.57 per cent.To get a Club Lloyds current account, there is a £5 monthly fee, unless you pay in £2,000 or more each month. Barclays Premier. Barclays is currently offering cheaper deals for its Premier customers. The cheapest is its Premier two-year fixed rate at 3.56 per cent at 60 per cent loan-to-value (LTV), meaning you have a 40 per cent deposit or equity, with an £899 fee.The rate is not significantly cheaper than its non-premier one – which sits at 3.57 per cent, though other products in its premier range are priced differently.To be a Premier customer, you’ll need to have a current account and either pay in a gross annual income of at least £75,000 – or have a total balance of at least £100,000 in savings or in eligible investments, or a mix of both. HSBC Premier. For Premier account holders, HSBC offers some of its cheapest rates. It is currently offering a rate of 3.56 per cent for a two-year deal at 60 per cent LTV, with a £999 arrangement fee. HSBC’s equivalent non-Premier product is priced at 3.59 per cent, also with a £999 fee, on a similar term, although again, the difference between different products varies.Like with Barclays, to be a Premier customer you will generally need a minimum annual income – £100,000 – paid into your HSBC account. Alternatively you need to maintain a £100,000 in savings or investments with HSBC.Are the deals worth it?
Whether the deals are worth it will depend on your individual circumstances, so if you are unsure, you could consult a whole of market broker directly.
But experts say if you do want to chase some of these deals, you should always ensure you will be able to access the mortgage you want with the bank first, before you go ahead and switch your account in order to qualify.
“I wouldn’t advise buyers to switch banks solely to chase a headline rate without first confirming eligibility, affordability and borrowing limits,” says Mendes.
In some cases, he says the difference in pricing is “modest” too, so it’s worth assessing how much you would actually save based on your price of mortgage.
For example, even if you have a large mortgage of £500,000 on a 25-year term, then borrowing at HSBC’s cheapest Premier rate of 3.56 per cent would cost you £2,520 per month.
At 3.59 per cent, the equivalent rate for regular customers, the bill would be £2,527 per month – £7 a month more.
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More important is comparing different lenders across the market, experts say.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “Seeking independent advice is essential for borrowers to assess all the latest deals available to them, and new buyers might be surprised to find they can get a preferential rate for being an existing customer.
“However, those looking to remortgage should not assume that they can get the best deal with their existing lender or current account provider, it’s wiser to shop around.”
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