Bradford & Bingley, which is committed to preserving its mutual status, is the first society to announce such plans but it expects others to follow its lead. The precise structure of the bonus scheme has yet to be finalised, but it is possible that borrowers who have held a pounds 60,000 mortgage for five years or more could expect a bonus of around pounds 800 every five years. Savers with more than pounds 10,000 invested could expect a similar amount if they have held the account for 10 years or more. All bonus payments will be linked to profit performance. Mortgage holders who fall into arrears with their repayments will be expelled from the scheme.
John Wriglesworth, Bradford & Bingley's general manager, said the scheme was a way of distributing to members the excess reserves which had been accumulating as a result of a slower mortgage market. Other alternatives such as paying a dividend or reducing the mortgage rate were ruled out.
Mr Wriglesworth said: "We think mutuality is defensible without this scheme but it does help. We hope that people will see there is a tangible benefit to mutuality." Other building societies such as Britannia, Yorkshire and Skipton are also examining loyalty schemes.
Mr Wriglesworth added that bonus payments from merging societies such as Halifax and Leeds were one-offs, whereas the proposed Bradford scheme will yield a rolling system of bonuses. The society stresses that investors with lower savings or mortgages will also benefit but will have to wait longer for the payments to begin.
The move towards bonus payments is the latest weapon used by building societies to fight takeovers and to stem the tide of "hot money" as investors place minimum funds in accounts hoping to cash in on possible takeovers.