New customer only - name and shame : Santander

michaels

So on the Santander website is a 5yr fix at 1.89% for remortgages.

However as an existing customer looking to re mortgage the best rate is 1.99% - total cost difference £1500.

Fees are the same even though obviously costs for Santander are higher for a new customer with valuation, legal etc.

How is this justified?

dimbo61

They are trying to get more customers.
Watch TV for the day and see how many companies are offering great deals for New customers.
Sky, BT and Talk Talk for example.
It keeps lots of staff busy, legal department, in house survey or valuation staff, selling other products IE life assurance, critical illness, contents insurance etc
Existing customers can sign up for a new deal online with No checks

mrginge

Presumably you!!!8217;re not suggesting there should be some form of intervention to force a business to charge a specific price?

kingstreet

Remortgage deals (that's a new mortgage with a new lender) are usually better than existing customer retention products.

That's because lenders measure themselves on new business, not business retention.

Thrugelmir

michaels wrote: »

How is this justified?

New customer is likely to borrow more than an old. Old customer has better LTV and therefore likely to move in any event. If there's a better rate available in the open market.

michaels

New customer same as me will make them 2.5k less over 5 years. That sounds like a pretty big investment to get someone on their books, a bit more than a 100 quid switching bonus. We are talking customers with at least 40% equity who are this pretty unlikely to go on to a more profitable follow on rate.

Perhaps I should switch to a no fees deal with another lender then immediately go back to Santander....

Thrugelmir

michaels wrote: »

New customer same as me will make them 2.5k less over 5 years. That sounds like a pretty big investment to get someone on their books

New business is expensive in any field. As with any product. A business relies on customer lethargy to switch. If the majority remain customers for a longer period. Then the exercise is a sucess. Likewise new business can be vetted, i.e. higher quality. With more stringent internal lending criteria.

Perhaps I should switch to a no fees deal with another lender

What's currently available that's competitive?

ACG

Are you sure you have got your figures right? £1500 over 60 months is £25 a month.
Your mortgage must be pretty large for 0.1% difference to equate to that each month.

In any case, they are a commercial business. They are more or less free to run it how they like. They are working on the assumption that if their deal of 1.99% is fairly competitive, you are unlikely to switch for the sake of a few quid a month but by charging something more competitive, they can buy in new customers and make money on them staying after their deal is up.

It is not uncommon, sky and virgin do something similar as do many banks, mobile phone companies etc. Many online shops also do something similar as to the AA/RAC I believe. The other way to think about it is that you went with them initially presumably because they had a good deal, so you have had your introductory offer?

michaels

Sadly figures are correct. 2.5k seems like a lot to get a new customer and not spend on retaining an existing customer. Can get about 18 basis points less than existing customer offer by shopping around which sounds worth it. Sky, virgin etc have customer retention teams who can negotiate so they don't end up losing too many customers and then pay a fortune to regain them. Seems odd banks don't see this as a worthwhile investment.

michaels

So they give you 14 days to decide if you are going to take the offer. Day 12 and I checked again and they are offering 5 basis points less - £600 over the 5 year fix. It would seem rude not to - I will probably hold the option now till the month end roll over rates are published but am not expecting another reduction as there are not a lot of 5 year deals out there below 1.85% with 2k fees.

shortcrust

I never understand the outrage that this very widely found and much discussed practice seems to elicit in some people. Offering incentives to new customers seems perfectly legitimate to me. It’s a bit like moaning that you have to pay for your gym membership for July when new members get July for free.