There are many economic benefits when considering customer loyalty including increased spending per client, reduced defections or more potential customers referrals (source). It is natural that you may think that being loyal to your bank is always a good strategy for saving money on your mortgage. However, you could be surprised that some existing banks’ customers overpay as much as £600 annually compared to the new customers of the same bank. This fact was described by Sam Meadow in the recent Telegraph’s article.

What Are Loyalty Charges?

„Loyalty charges” or „loyalty penalty” is the difference in charges between new and existing customers where a new customer is paying less. According to Meadow, the following banks were caught on using this practice:

  • NatWest,
  • Leeds Building Society,
  • Bank of Ireland.

Although other banks were not mentioned in the article, it does not mean that listed institutions are the only ones that charge loyalty penalty. The question you may have now, is how to find out whether you are charged more and how to protect yourself against this practice? Fortunately, we have an answer for you.

How to Avoid Loyalty Charges?

Specialist mortgage brokers like Five Star Mortgages can help you with avoiding loyalty charges. Once your beneficial offer is over, we will compare your current plan with the whole of the market. In other words, the solution to the problem of being overcharged is remortgaging. Remortgaging, in turn, is the process of transferring your mortgage from one lender to another. You can read more about this topic in our recent article here or on Wikipedia.
Remortgaging may seem to be an overwhelming and complicated process at the first glance – banks realise that and, for this reason, they may charge you more if you decide to stay with them. In reality, experienced mortgage advisors can help you with remortgaging in a professional and pleasant way. It does not have to be a stressful experience at all.

When Can You Start Thinking About Doing Remortgage?

Usually, banks offer a standard fixed rate for the first 2 or 5 years of repayment. After this period, the monthly rate can go up, even as much as £50 monthly compared to rates of the new customers. Therefore, the answer to the question of when you should start thinking about doing remortgage depends on the contract terms that you signed with the lender. Sometimes your bank may offer you a better repayment deal and you don’t have to transfer the mortgage to another institution. The mortgage advisor from Five Star Mortgages will take into account all available options.


In his article, Meadow discussed an important issue associated with how banks are overcharging existing customers on their mortgage repayments. If you suspect that you are a victim of this practice, contact a friendly mortgage advisor to speak about your situation. We recommend considering remortgaging especially when your fixed rate is over and now you pay a standard variable rate (SVR).

We encourage you to contact our friendly team on 01536 216 418. 
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