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NatWest accused of ‘ripping off’ existing customers with higher mortgage rates

NatWest
NatWest

NatWest has been accused of “ripping off” existing mortgage holders by failing to offer them the same rates as new customers.

Brokers said the bank, which is Britain’s third largest mortgage lender, regularly reserves the best possible rates for new customers only.

They have called on the City watchdog to bring in tougher rules to prevent lenders from penalising existing customers, as is the case in the insurance industry.

NatWest currently offers new remortgage customers with a 60pc loan-to-value rate of 3.97pc for a five-year fix – one of the best deals on the market.

However, in one scenario seen by The Telegraph, an existing customer, who fit the credentials for the sub-4pc rate, was offered a higher 4.11pc deal.

With £570,000 left to pay off, the difference in rates will cost the customer thousands of pounds in interest over the next five years.

The Essex resident said: “It seems unfair. As an existing customer, it should be cheaper to onboard me with limited hassle.

“This sort of thing really irritates me – essentially I’m being penalised for being a loyal customer.

“It has been banned for insurance so why is it allowed for mortgages? Banks are ripping off existing customers.

Three years ago, the Financial Conduct Authority (FCA) set new rules to stop insurers from “price walking” – the practice of steadily increasing the premiums paid by the millions of people who never switch providers.

Yet, brokers said there is limited regulation in the mortgage industry – paving the way for lenders to “punish existing customers”.

Simon Bridgland, of financial advisers Release Freedom, said differential pricing “should have been laid to rest long ago”, but the FCA confirmed it is not prohibited.

Instead, the watchdog’s Consumer Duty states that prices should be “reasonable” for all customers.

A spokesman said: “Mortgage lenders need to be able to demonstrate they’re giving all their customers fair value, including when they are charging different customers different prices.

“We would always encourage people to shop around. They may be able to get a better deal with another lender.”

Research from marketplace LendingTree shows that 54pc of mortgage holders do not shop around for a different deal.

Brokers said there is an age-old misconception among borrowers that it pays to be loyal and stick with the same provider.

Jack Tutton, of SJ Mortgages, said: “People often believe that the best thing to do is to stick with their existing lender, but this pricing model takes advantage of that.

“It can cost them significantly should they not fully understand all the options available to them.”

The Telegraph approached the UK’s six biggest mortgage lenders to ask if their loyal customers are rewarded with the best possible rates.

Lloyds Banking Group said its existing customers are offered deals “at or below” those of new customers, while Nationwide said its “pricing pledge” means all switcher rates are the same or lower than the remortgage equivalents. HSBC declined to comment.

Santander confirmed it has the same policy, and Barclays said existing customers can qualify for exclusive lower rates.

A NatWest spokesman said: “We offer different products and services through different channels, with clearly signposted customer guidance no matter which route they choose to take.

“Our existing customers are also able to select a rate six months before the end of their term and can also change their mind to select another rate within that time.”

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