CUSTOMERS could tap into “secret” deals with their mortgage lender that could slash hundreds of pounds off their mortgage bills – but it comes at a price.
Banks offer lower mortgage rates to customers who sign up for premium products like current accounts so they can tempt in new business.
These are called “relationship mortgages”, and experts say they are on the rise.
Aaron Strutt, product and communications director at Trinity Financial, said: “Relationship mortgages are on the rise to help the lenders to attract customers but also to keep them for longer.”
However lots of people are completely unaware that these lower mortgage deals exist.
Strutt added: “Not all of the lenders make their rates obvious and they are not always easy to find on their websites.”
We explain how to get them – and if they’re worth it.
Who offers “relationship mortgages?
Lloyds currently offers the cheapest deal on the market.
You can get a two-year fixed rate of 3.47 per cent with Lloyds (but you need a 40% deposit) if you have a Club Lloyds account.
Club Lloyds current account cost £5 a month unless you pay in at least £2,000 each month, and you’ll get benefits including a Disney + subscription and access to preferential exchange rates when ordering travel money with Lloyds.
On a £200,000 mortgage with a 25-year term, your monthly repayments would be £998.
It also offers a 3.52 per cent deal for Club Lloyds customers who have a 25 per cent deposit. Both deals come with a £999 arrangement fee.
However, the cheapest mortgage deal Lloyds offers to those not signed up for the account is 3.57 per cent fixed for 27 months.
Based on the same mortgage size as above, monthly repayments would be £1,009 – which works out at £130 a year extra.
Other banks offer “relationship mortgage” deals too, like Barclays.
It offers a 3.56 per cent two year fixed deal for premier customers at a £899 fee for borrowers with a 40 per cent deposit but the deal is not available for remortgages.
There’s no fee to join Premier Banking but you need a lot of cash in your wallet – you must have a current account with Barclays and either pay in a gross income of £75,000 a year, or have at least £100,000 in savings with the bank.
It offers perks such as an AppleTV+ subscription (usually £9.99 a month).
Can I get one – and are they worth it?
Experts point out that the availability of these deals depends on your personal circumstances and credit score.
Nick Mendes, mortgage technical manager at John Charcol, said: “They tend to work best for straightforward borrowers with strong credit profiles who fit the lender’s standard criteria and are comfortable with the product structure.”
That means if you have a poor credit score, you may not be eligible.
Borrowers also have to weigh up the arrangement fee, early repayment charges and how long they realistically expect to hold the mortgage.
A deal that is cheapest on rate is not always cheapest on total cost.
Use mortgage comparison sites such as Moneysupermarket or Uswitch to compare available mortgage rates.
Mendes added: “Whether customers save money in the long run comes down to the full package.
“If a borrower qualifies cleanly, expects to hold the deal for the fixed period, and the fee structure stacks up, these offers can deliver a genuine saving.”
But mortgage experts stressed that borrowers should seek independent advice from a broker to compare all the deals available to them.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “New buyers might be surprised to find they can get a preferential rate for being an existing customer.
“Those looking to remortgage should not assume that they can get the best deal with their existing lender or current account provider, it’s wiser to shop around.”
How to get the best deal on your mortgage
IF you’re looking for a traditional type of mortgage, getting the best rates depends entirely on what’s available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.