Great deals - but not for the apathetic

All it took was a five-minute phone call and the magic words: 'We've been shopping around and we're thinking of moving our mortgage.'

Our lender, Lloyds TSB, promptly offered to replace our expensive standard variable rate deal with a no-strings-attached base-rate tracker that would cut the interest rate by 0.8 per cent until the end of 2005.

A 5.7 per cent rate may not be the most competitive deal on the market, but the only hassle involved was getting a couple of friends to witness our signatures.

And besides, I wanted the convenience of being able to carry on with our penalty-free facility to make regular monthly overpayments on our mortgage.

When asked why the bank hadn't told us about this deal before, the customer services person said that if we'd been into a branch, we'd have seen the adverts. Given that we have each set foot in our branch precisely once, this struck me as feeble.

If I had been a longstanding customer of the Coventry building society, I wouldn't even have needed to pick up the phone. Back in May 1996, this Midlands-based mutual woke up to the unfairness of leaving loyal borrowers paying a high SVR while new customers on special deals got much lower rates.

Since then any customer of five years standing (including those coming off special deals) is automatically moved on to the society's 'privilege' rate. This is currently 6 per cent - a discount of 0.75 per cent on Coventry's standard rate.

Not only that, but every year, customers receive a leaflet with their annual statement giving details of all current deals, plus a letter reminding them that they are free to switch at any time.

The Skipton building society also takes steps to reward loyalty, but makes customers wait only two years before automatically discounting its SVR of 6.65 per cent by 0.3 per cent. After four years, the discount rises to 0.5 per cent, which brings the SVR down to a reasonable 6.15 per cent. Slightly less gener ous is the loyalty scheme at Britannia building society, where the SVR of 6.64 per cent is reduced by 0.2 per cent after five years, and by 0.4 per cent after 10 years. However the society also pays its customers a cash bonus every year on top of the discount.

It took HSBC until July 2000 to realise that using old borrowers to subsidise new ones was 'bad customer relations'. But when it decided to scrap its old SVR and discounted variable rate deals in favour of its 'Homebuyer' mortgage rate of 5.25 per cent - which is guaranteed never to be more than 1 per cent above base rate - existing SVR customers did not have to lift a finger.

It was the same story at the Nationwide building society, where 600,000 existing SVR customers got an automatic 0.5 per cent cut when the society moved them all on to its 'base mortgage rate' - currently 5.49 per cent - on 1 March this year.

So what do the rest of the top 20 lenders do to ensure that their longstanding SVR customers don't pay over the odds? Not a lot in the case of Barclays (with an SVR of 6.55 per cent) and the Chelsea building society (6.34 per cent).

These lenders both adopt the same laissez-faire approach as Lloyds TSB and rely on customers spotting - and acting on - adverts for cheaper deals in branches.

So does the Alliance & Leicester (6.6 per cent), although this lender says it does from time to time write to customers to let them know about new mortgage offerings - and, no doubt, the £250 fee charged to customers who decide to switch to one of them. However, there's no charge for customers switching to a flexible base-rate tracker mortgage (5.45 per cent).

Yorkshire building society also relies on branch promotions, but keeps borrowers up to date on new deals via its customer magazine.

This mutual says it would be uneconomic to write to every customer individually and argues that because its SVR is a reasonably competitive 6.15 per cent (5.85 per cent from 28 October 2001), customers don't suffer from being stuck with a high SVR.

Branchless Standard Life Bank - which has an SVR of 5.75 per cent - says that there's no point telling customers about other deals because, unless they want to move from a variable to a fixed rate, 'there won't be a better product'.

Bank of Scotland (6.45 per cent) and the Woolwich (6.55 per cent) do what the Banking Code requires banks and building societies to do for savers. Although the Mortgage Code doesn't say they have to, these two lenders enclose a leaflet detailing all current deals and interest rates with a customer's annual statement.

Both Bristol & West (6.5 per cent) and Northern Rock (6.5 per cent - falling to 6.25 per cent after seven years) have started to mailexisting customers to make them aware of all their deals and hope to have completed these exercises some time next year.

In May, Cheltenham & Gloucester started writing to customers to tell them that they could transfer from their 6.35 per cent SVR to the lower 'C&G Variable Rate' of 5.45 per cent for interest calculated annually, 5.6 per cent for daily interest.

However, both the lower rates and the mass mailing have been suspended pending the outcome of the Ombudsman's ruling on other lenders' dual variable rates.

Abbey National (6.65 per cent), Halifax (6.5 per cent), NatWest (6.49 per cent), Portman BS (6.4 per cent) and the Royal Bank of Scotland (6.49 per cent) take a more personal approach and write to customers who have not applied for a better deal to invite them into a branch for a chat.

Bradford & Bingley (6.29 per cent) is writing to invite existing borrowers to make use of the in-depth advice available from advisers in the Market Place - its independent mortgage advice arm.

HSBC is scathing about such invitations and says that they are 'used as an obstacle' to a customer getting a better deal because they trade on apathy.

One cynic, who prefers to remain nameless, says that the reason some lenders are so keen on getting customers in for face-to-face meetings is that these give them the opportunity 'to flog a whole load of other products'.