Money Insider: Banks reward loyalty – but is it enough?

barclays bank has launched a range of discounted loyalty mortgage deals following similar moves by HSBC, the Halifax, Nationwide and Santander, which also offer preferential rates to existing current account customers.

Barclays cut its fixed-rate, tracker and offset mortgage rates by up to 0.54 percentage points for customers who have a current account and have paid in at least £800 in each of the three months before submitting their mortgage application.

There is no question that it is a generous discount, resulting in some of the re-priced deals featuring at the top end of best-buy tables. The discount on Barclays two-year fix is the best of the bunch and cuts the rate to a very competitive 2.95 per cent with a £999 fee, up to 70 per cent loan-to-value (LTV). This gives the equivalent HSBC two-year deal – at 2.99 per cent with a lower fee of £399 – a close run for its money.

However, there is also a third option to consider from the Yorkshire Building Society – a rate of 2.89 per cent with £995 fee available to a more generous 75 per cent LTV.

Other examples include the Barclays two-year fix for customers needing to borrow to 80 per cent LTV, at 4.19 per cent with a £999 fee, although the Post Office is offering 3.94 per cent at £995 and up to a higher LTV of 85 per cent.

Similarly, if you are looking at a five-year fix, the Barclays rate of 4.44 per cent and £999 fee (up to 70 per cent LTV) is beaten by the Yorkshire BS at 4.19 per cent with a fee of £495, to a slightly higher LTV of 75 per cent.

There is a growing trend among banks to reward existing customers and cross-sell products with reduced rates or fees as a loyalty incentive. It is good to see mortgage providers tending to the needs of existing customers rather than concentrating their efforts on trying to attract new business.

But while this move by Barclays is to be welcomed, the competitiveness of products on offer from any of Britain's high-street banks is not the be-all and end-all – it is very much about service too.

I wish Britain's lenders could just sort it out

I don't expect my bank to make errors with my account but, if it does, all I ask is that the matter is dealt with promptly, efficiently and for me to be confident that the situation has been taken seriously and won’t happen again.

There are times where things go wrong but if banks focus too much on selling new products rather than providing consistently excellent customer service, all the good work on lower pricing will come undone.

I don’t want to hear automated important, then ave to wait five minutes to speak to someone who doesn’t have the authority to rectify my issue there and then. I don’t want to hear promises that someone will get back to me but then no one does, forcing me to call again.

I don’t want someone to tell me they’ve sorted the issue, only for my ATM card to be swallowed later that day, or for my statement to show a bank error has been rectified and I have been charged for the privilege.

The biggest irritation for many is that if your bank wants to sell you a product, it seems the systems are all joined up and it’s very simple. But go into your branch and ask for a problem to be put right and suddenly you find none of the centralised offices, UK-based or overseas, seem capable of sorting it out.

Having the most branches, the longest opening hours or best rates on the market is meaningless if they are not backed up by first-class communication and customer care.

Headline rates may look impressive at the top of a best-buy table but, if you find yourself with a reputation for shoddy customer service, they will win you very little in the way of new custom.

Andrew Hagger is a money analyst at

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