MONEY COMMENT
Mortgage Disloyalty Pays Handsomely

By Cliff D'Arcy
February 12, 2003

Recently, I wrote about my mortgage and how I've squeezed better deals out of my lender, Abbey National (LSE: ANL). However, there has been a recent twist in the tale that I thought would be worth mentioning.

Currently, I have a tracker mortgage with an interest rate equal to the base rate plus 0.75%. This equates to 4.75%, falling to 4.50% next month when Abbey factors in the recent 0.25% cut. Hurray!

Recently, whilst in one of my periodic financial frenzies, I scoured the Web to locate the best mortgage deals available at the time.

Here's how I found the best deal for me (bearing in mind that I'll probably move house later this year and may need to borrow a whole lot more, so I mustn't be locked in):

Capped and fixed-rate deals

> I don't need the security of a fix, as my mortgage is a voluntary debt
> I want the freedom to pay off my mortgage on a whim
> Fixes tie you in for a specified period
> Fees can be up to £500.

So, I didn't want a fix.

Discounted-variable rates

> I don't want to be locked in or have any redemption penalties
> I want a rate lower than 4.50% without large upfront fees
> The best rate in this category is 4.55% with a £149 fee - I don't save money with this deal.

So, I moved on.

Current account and offset mortgages

> Savings and/or current account balance is used to reduce mortgage interest bill
> Interest calculated daily, can overpay, underpay and take payment holidays
> Avoid paying tax on savings interest
> The price of this flexibility is higher rates than I'm paying now.

Again, I kept looking.

Tracker and flexible deals

> Flexible mortgages combine low rates with a daily interest calculation and convenient features
> Tracker mortgages track the base rate, which is expected to fall over the next 12 months
> The best trackers around offer rates lower than the base rate, in other words, under 3.75%.

I've found a tracker that charges base minus 0.21%, currently 3.54%, with a fee of £299 (and a two-year penalty period, but I'll live with that as the mortgage is portable).

This is 0.96% less than I'm paying now but, ironically, is only for new customers of, you've guessed it, Abbey National!

Here's the rub: when I called and e-mailed Abbey National a while back to insist, "Give me a better deal or lose my business", they refused!

I used all my marketing skills to explain that, as a good customer of ten years' standing, it would cost ten times as much to replace me than it would to keep me. Also, I'm a low-risk borrower with a good payment history, who Abbey may replace with what could turn out to be a less wholesome customer.

All my words were in vain - it was clear that Abbey wanted me to be disloyal and go elsewhere. As Abbey wasn't keen to offer me a better deal, I'm going to have to move on and end a beautiful relationship(!)

But first, as a shareholder, I'm going to write to the CEO and Chairman and give them one last chance to change their minds...

The writer has a beneficial interest in Abbey National.