A & L Rip off for existing customers

maveli

Just noticed Alliance and Leicester charge an extra £250.00 for existing customers choosing one of their re-mortgage products.

For example their 2 year base rate tracker is available to new customers for £599.00 setup fee where as existing customers need to pay an extra £250.00 on top of this as "mortgage review fee"

What a way to reward loyalty.

jhxmt

What a way to stop customers on their profit-making products from switching onto a less-profit-making product, to be honest.

Also, what a way to encourage new business to come in from customers of other lenders.

Unfair? Potentially, if that's the way you want to consider it. Good way of increasing business? Also potentially.

I don't necessarily agree with it, but I think that from the lender's perspective it's a good idea!

dunstonh

The £599 is fine but the £250 is unfair but they are allowed to do it.

It does seem a strange concept because you are, in effect, telling your existing customers to take their mortgage elsewhere. At the same time they are "buying" in new lending under a more expensive application process than an existing borrower choosing a new deal and earning less from it.

There is no logic to the charge in that form.

Dan_Collins_2

Depends how you look at it. If you were a Halifax client you be lucky with those rates, they are as good as whats on the market and the fees in total are not to bad.

Leeds_Fella

Hi,Both the A&L and Halifax are very uncompetitive mortgage deals.I have been looking for some time and would recommend looking at the following web sites:First directLeeds BSYorkshire BSWith the increased fees, the "total costs" over 2 or 3 years is a great deal less.

maveli

I am thinking of going with HSBC life tracker at 5.73%, setup fee 599.00. No early repayment charge

seraphina

I am continually amazed at the number of people who complain when banks charge fees. They are a business and exist to make money. If you don't like it, then don't use them - that's what this site is about after all! If you can't change, then they have you over a barrel - they have something you want and you have to pay what they demand. Why does this continue to surprise people??

MarkyMarkD

I'm surprised to see dunstonh, with whom I nearly always agree, taking this tone.

It's not unfair at all for lenders to charge a "mortgage review fee" or similar.

The original mortgage product was priced up on the basis of customers paying a £295 MEAF if they redeem the mortgage.

If the customer chooses to, instead, stay with the lender, but switch product, they get charged a lower fee of £250.

So, a loyal customer is rewarded £45 for staying - and then still allowed products available to new customers at the same rates and with the same fees. But they don't have to pay valuation fees or legal fees for remortgaging elsewhere.

A&L's approach makes a lot more sense than (say) Northern Rock's, where the two fees are reversed and therefore loyal customers are charged £45 more than new ones, instead of £45 less.

dunstonh

I'm surprised to see dunstonh, with whom I nearly always agree, taking this tone.

It's not unfair at all for lenders to charge a "mortgage review fee" or similar.

My view is more that I find it strange that they are charging someone more to stay with them on what is a very simple and cheap transaction than a new borrower on a transaction that costs them more.

Lets say they lose 40% of the mortgages that come out of a deal, that means they have to gain 40% on new business just to stand still. That 40% they have to get costs them more to obtain.

That said, we have mentioned many times before that the profit on fixed rates is on the cross sale opportunities more than anything else and there is more chance of getting that on new business and not existing business. So the review fee is probably to make up for that.

I guess I can see some logic on the fee but the problem is that whilst others are not doing it, you run the risk of losing more than you gain. Perhaps this is an indication that A&L are no longer buying mortgage business but are looking to increase their profit margins rather than market share.

Dan_Collins_2

Leeds_Fella wrote: »

Hi,Both the A&L and Halifax are very uncompetitive mortgage deals.I have been looking for some time and would recommend looking at the following web sites:First directLeeds BSYorkshire BSWith the increased fees, the "total costs" over 2 or 3 years is a great deal less.

I was saying that Halifax customers would be happy with A&L deals as Halifax retention is poor at the mo!

A&L fixed rates are ok but you can beat them.

MarkyMarkD

dunstonh wrote: »

I guess I can see some logic on the fee but the problem is that whilst others are not doing it, you run the risk of losing more than you gain. Perhaps this is an indication that A&L are no longer buying mortgage business but are looking to increase their profit margins rather than market share.

Thanks for the response. Once again I see what you mean - sort of - but once a borrower is already with a particular lender, it's irrelevant whether other lenders charge MRFs or not - the existing A&L borrower has no choice other than to pay it, or leave. And paying the MRF is cheaper than paying the MEAF.

The fact that some lenders do, and some lenders don't, charge an MRF is only likely to affect whether borrowers choose a lender in the first place. And many borrowers don't look that far ahead, as is proven by the fact that many borrowers took mortgages from lenders like Abbey and Halifax when they both price discriminated hugely against existing customers.

At that time (and I think we are back at that time, in point of fact, as Halifax's level pricing for existing borrowers bit the dust a while back) getting a deal from A&L, knowing that you could switch for £250 at the end, compared to getting a deal from Abbey or Halifax knowing that you'd definitely have to remortgage away at the end, should have been a no brainer. But Abbey and Halifax out-sold A&L by about 10 to 1!

Why's that then?

Neither borrowers nor their advisers actually think further than the current deal, that's why, IMHO.

I personally have an A&L mortgage. It was a good deal when I bought it, but a significant factor in choosing it was the thought that I would have the option to switch to another good value product at the end of the tie-in period, and that would cost me £45 less than the equivalent product would cost a new borrower. Given that A&L has a "best buy" strategy, the chances of a new customer deal less £45 being a best buy are fairly high.