The price of loyalty

Mortgage lenders are ignoring the age old business adage that it's five times more expensive to win a new customer than to keep an existing one.

By charging customers who want to renew their fixed rate mortgage with the same lender, providers are leaving customers wondering why they have to pay a price for their loyalty. Consumers coming to the end of a two-year fixed rate mortgage looking to renew with the same lender will face costs ranging from around £500 to £2,900.

Louise Cuming, head of mortgages at price comparison site moneysupermarket.com, said: "With mortgage applications on the decrease, lenders should be concentrating on retaining existing customers now more than ever.

"It's disappointing seeing lenders treating their existing customers this way. Loyalty should be rewarded, not punished. Instead these costs reflect pretty poor business practice.

"These charges come with many different names, but ultimately they all mean the same thing; a cost for remaining loyal.

"Even HSBC, which is the only major provider to waive all fees, blots its copybook by not allowing those customers to go on to its best rate – typically costing an extra £500 in interest over two years.

"While Northern Rock is clearly trying to lose customers, it is a shock to see Britannia charging its loyal customers a £1,999 arrangement fee.

"Providers seem to be taking loyal people for granted and forgetting that existing customers cost so much less to win."