Britannia cash bonuses for loyal members

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Britannia, the UK's sixth-largest building society, yesterday stepped up the pressure on other mortgage lenders with a loyalty package including both lower-cost home loans and cash bonuses to its 1.6 million members.

The society's payouts, worth more than pounds 35m, are structured to reward both long-term borrowers and savers, with cash payments of up to pounds 500 per member being made in a year's time.

In addition, if borrowers keep their mortgage with Britannia for more than five years, the society will chop 0.25 per cent off its variable interest rate, worth about pounds 9.50 a month on a pounds 50,000 interest-only loan.

Cash handouts will also go to members who take out insurance policies or other investments though the society's bancassurance arm, Britannia Life.

John Heaps, Britannia's chief executive, said: "We are breaking new ground with this scheme. We are making payments direct to members and are specifically rewarding long-standing members.

"The scheme is not an alternative to the highly competitive mortgages which we naturally have to provide. It is being introduced to give extra value to membership of Britannia."

The scheme, based on a complicated points system, means a couple with savings of pounds 5,000, a pounds 60,000 mortgage and a life assurance policy with Britannia Life, will receive pounds 130 each year. Someone with pounds 2,000 in an account but no mortgage will get pounds 6.25 a year.

Each point is worth about 25p, but the society said this could rise or fall in the future, depending on the annual profits it makes. A pounds 500 cap has been set on payments.

Britannia's cash-back scheme marks a radical departure from bonus systems from Bradford & Bingley and Yorkshire building societies. In their case, borrowers get a cut in mortgages of up to 0.25 per cent, with savers receiving a similar boost to their rates.

Bradford & Bingley nevertheless welcomed Britannia's announcement yesterday.

Nationwide, at present the second-largest society, is expected to announce plans for its its eight-million members within weeks, with analysts predicting a variant of Bradford & Bingley's system.

It also intensifies pressure on Woolwich and Alliance & Leicester, whose members have yet to vote on their societies' flotation plans.

Britannia said yesterday that about 75 per cent of members will qualify for payment next year, with the bonus averaging pounds 40 per head. About 48 per cent of its 300,000 borrowers qualify for the 0.25 per cent mortgage discount, expected to cost the society a further pounds 6.5m.