Bradford & Bingley members can take the windfall and run

Borrowers may do better elsewhere

Bradford & Bingley members know from recent experience that windfalls aren't what they used to be. As the former building society started trading on the stock market last week, some three million members received windfall shares worth about £600 - a far cry from the estimated £1,000 forecast by optimistic carpetbaggers, and far lower than payouts received by members of other former building societies.

Bradford & Bingley members know from recent experience that windfalls aren't what they used to be. As the former building society started trading on the stock market last week, some three million members received windfall shares worth about £600 - a far cry from the estimated £1,000 forecast by optimistic carpetbaggers, and far lower than payouts received by members of other former building societies.

So those members who have hung on to savings accounts and mortgages to qualify for a windfall will be less than pleased. Chief executive Christopher Rodrigues shrugged off the low flotation price, blaming it on the fact that the FTSE 100 has fallen since the beginning of the year when the price was set.

But now members have got their windfalls, however small, they can think about switching savings accounts and mortgages to providers offering better rates.

David Hollingworth, mortgage specialist at brokers London & Country, says a number of his clients who held on for windfalls are assessing whether to move. He points out that B&B borrowers with a £100,000 mortgage at the standard variable rate (SVR) - currently 7.64 per cent - would save £2,090 in the first year if they switched to a Halifax tracker mortgage, which currently has a rate of 5.55 per cent. This is 0.45 per cent below the Bank of England base rate until 31 December 2002, with no fees or penalties for early redemption.

"Now they have got their windfalls, customers are able to move," he says. "Anyone on an SVR should be looking to move to another deal anyway, whether [they are] a B&B customer or not."

Mortgage customers looking for a flexible loan will need to move as well, since B&B does not provide this option. Alliance & Leicester is offering a flexible loan that allows overpayments. This has a 2.5 per cent discount for the first year, giving a payable rate of 5.24 per cent. It then moves on to 0.95 per cent above the base rate for 10 years. There are redemption penalties in the first year, but no arrangement fees.

B&B is trying to stem the tide of departing customers by relaunching itself as an independent mortgage advisory service. After buying mortgage broker Charcol earlier this year, the lender is rebranding a number of its 600 branches as "Marketplace at Bradford & Bingley", where customers will be able to access mortgage and insurance brokerage services. So from February, customers entering a B&B branch for mortgage advice may end up with a Halifax or Woolwich loan.

Customers, who do not have to be with B&B, will pay a £200 charge for this service on loans under £50,000 or £400 for loans over £50,000. B&B gets a fee from the lender whose business it recommends.

"It means we will be offering more than 500 mortgages," says Chris Holland, corporate affairs manager at B&B. "We will no longer exclusively be offering our own mortgages. Like all lenders we want to retain as many of our borrowers as we can, but this service will broaden our range of services."

Ray Boulger, technical manager at Charcol, says the new service means that B&B customers should not automatically consider moving, particularly if they will incur huge redemption penalties for doing so.

"If [a customer] has a mortgage with redemption penalties and wants to move, B&B is offering a very competitive tracker rate so you avoid paying the penalty and get the additional bonus of a favourable rate," he says. "For those without redemption penalties, B&B is offering reasonable deals, looking at each customer on their own merit."

He points to B&B's fixed rate of 5.99 per cent until 1 December 2005, although this carries penalties for early redemption on a reducing basis over the five years. But it is not that much more expensive than the cheapest deals on the market - Bristol & West's 5.55 per cent fixed for five years on loans above £100,000, or Portman Building Society's 5.99 per cent.

While B&B focuses its attention on mortgage business, savers risk languishing in poor-paying accounts. Most savers can get better rates elsewhere. B&B pays 2.05 per cent on its instant access First Choice account for balances of £500, but Nationwide pays 6.7 per cent on balances of £1 in its e-Savings account, available only over the internet. If you prefer not to use the net, Northern Rock's Base Rate Tracker, a post and telephone account, pays 6 per cent interest and requires no notice on withdrawals.

* Contacts: Alliance & Leicester, 0845 300 4004; B&B, 0845 600 8885; Bristol & West, 0845 300 8000; Halifax, 0800 203049; Nationwide, www.nationwide.co.uk; Portman, 01202 563502.