Mortgage rates: first time buyer vs switching deal

db579

My mortgage provider (Halifax) appears to have lower rates for first time buyers than for existing customers looking to switch deal - for the exact same loan amount, loan-to-value ratio and mortgage term.

Is that allowed? My understanding is that insurance firms for example are not allowed to offer better rates to new customers than they offer to existing customers under the FCAs "loyalty penalty" ban. This would seem to be an equivalent situation, do no similar regulations apply here?

amnblog

Yes, it is allowed, yes that is the case. Although bear in mind that they do not publish switch rates. Each borrower is offered individually and your offered rates may not match those of other borrowers.

ACG

I can only echo what amn has said. 

I am fully on your side with the way I imagine you are thinking, but that does not help much. I have customers who are stuck with Halifax and we have been keeping an eye on rates dropping for the last 4-5 months but they have not come down, in some cases they have gone up. 

I think people accept their is a premium for sticking with the same lender, but at the moment the difference is quite significant. 

db579

That's frustrating but I appreciate both of your responses. I can understand there might be a premium vs another provider but the same provider offering the same customer different rates based on non-risk based criteria certainly feels unfair and in need of similar regulation.

amnblog

db579 said:

That's frustrating but I appreciate both of your responses. I can understand there might be a premium vs another provider but the same provider offering the same customer different rates based on non-risk based criteria certainly feels unfair and in need of similar regulation.

Regulation is one thing the mortgage market is not short on.

ElwoodBlues

I'm with NatWest and their 5yr fix is slightly cheaper for new buyers (about .15%). But their 2yr fix is more expensive for new buyers, by about the same amount. So not much in it really. I guess it depends how much you value the stress/hassle of switching lender.

ACG

ElwoodBlues said:

I'm with NatWest and their 5yr fix is slightly cheaper for new buyers (about .15%). But their 2yr fix is more expensive for new buyers, by about the same amount. So not much in it really. I guess it depends how much you value the stress/hassle of switching lender.

I am with virgin it is usually around 0.25%, but with Halifax its quite a bit more, I think over 0.5%, maybe getting closer to 0.7%.