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Loan pledge loses its shine

Guy Anker examines Nationwide’s decision to scrap its policy of the same deals for all customers and the industry’s reaction

This means that a first-time buyer, for example, will get a better rate than an existing client remortgaging. However, existing customers will be given a £100 discount on a reservation fee for a new mortgage.

The decision, first revealed by Money Marking Online last week, has been given a mixed response by the market, with some slamming Nationwide for reneging on its promise to treat all customers in the same way.

However, others have been less critical, saying it is still offering a level playing field in certain circumstances.

Nationwide says it “takes offence” to much of the coverage that describes its decision as a U-turn.

The building society says in correspondence with brokers: “Remortgage/ switcher/ further advance customers will continue to receive an exceptionally competitive offering. These rates are slightly higher than for house purchase business.”

Nationwide goes on to defend its stance: “Our fair approach to existing mortgage customers remains, as new and existing mortgage customers in the same circumstances, such as buying a house, will be offered the same great rates that we are renowned for.

“In fact, we are now actively rewarding loyalty through discounted reservation fees to existing mortgage customers. Existing mortgage customers will not be disadvantaged by a product range which is available to brand new customers only.”

The irony is that Nationwide’s main selling point in its marketing campaign is that it offers the same deals to new and existing customers.

Its famous TV ad campaign features a fictional bank clerk telling existing customers that they cannot get the advertised rate as that is for “new customers only”.

It says it is determined to continue running the ads but has not decided whether to reword some of its slogans as a result of the changes.

But The Mortgage Practitioner sole trader Danny Lovey says: “This destroys the argument that Nationwide does the same for new and existing customers but they are not bad deals. It is not adviser-friendly and this is a missed opportunity.”

Moneysupermarket.com is equally scathing in its criticism of what it sees as Nationwide’s hypocritical stance.

Head of mortgages Louise Cuming says: “It seems that loyalty will get you nowhere with this surprising backtrack from Nationwide on its mortgage policies. Justification comes in the form of ‘new and existing customers in the same circumstances will have access to the same rates’. It will be interesting to see if the firm still tries to get away with its famed ‘new customers only’ slogan.

“In our experience, people want to benefit from the very best deal available, especially if they have been loyal to a particular lender for a certain period of time. Now there are zero points for loyalty, just a £100 discount on the reservation fee when switching for one product to another.

“Admittedly, to date, Nationwide held its own in the new and existing customers game – standing out from other lenders which penalised one or other. But I fear it has really lost its moral high ground on this one. After shouting loudly about its unique mortgage policies, it has shot itself in the foot with this action and I imagine it will only serve to reduce its faithful customer base.”

A surprising aspect of Nationwide’s product switch is that it had attracted much praise from many quarters over the past few years for its policy.

Earlier this month, Edeus managing director Alan Cleary said at Money Marketing Live that policies such as Nationwide’s are ideal as an alternative to retention schemes that pay a full proc fee as a means to keep customers on a lender’s books.

However, Nationwide executive director Stuart Bernau claims that the decision is a commercially sound one that will allow the company to achieve overall better pricing.

He says: “By making these changes, we will achieve greater flexibility and will be better placed to offer all our mortgage customers exactly what they want.”

Nationwide’s new product range is now similar to that of Halifax, which also offers the same deals to new and existing clients if they fall within one of its three ranges – FTBs, homemovers and remortgage customers. Like Nationwide, if customers move between product ranges, then new and existing customers will not necessarily get the same deal.

As mortgage market U-turns go, this decision is not in the same league as the Government’s change of heart in July when home condition reports were removed as a compulsory part of home information packs but it has caused a stir throughout the industry.

However, London & Country mortgage specialist James Cotton does not see the Nationwide move as a simple U-turn.

He says: “Technically speaking, this is not a departure from Nationwide’s stance of offering a level playing field to new and existing customers – rather it is differentiating between rates offered for homebuying and remortgaging.

“However, it remains to be seen whether existing customers will feel this move is in the spirit of Nationwide’s same deal for all policy.”

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Talking points

I am of that old-fashioned school of thought that believes when a minister wishes to make a policy announcement, it should be made in the House of Commons. The reason why our democratic system works is that those who govern know they do so with the consent of the governed. Part of this social contract is the ability of the people, through our elected representatives, to challenge the proposals of the Government.

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