Nationwide criticisms misguided

Nationwide is again taking lots of criticism for treating new customers differently from old, but, again, the criticism is unfounded.

The press has been slamming Nationwide today for apparently breaking promises to offer the same mortgage deals to new and existing customers. This isn't the first time large parts of the media have got it wrong about Nationwide.

Here's what Nationwide is changing

Currently, Nationwide mortgage-holders benefit from a guarantee that, when their introductory deals expire, their mortgage rates will never be more than 2% above the Bank of England Base Rate. From 30 April, all new deals will not include the guarantee. This means that when the deal ends the standard variable rate could be anything, just like any other bank or building society.

Nationwide can't go breaking promises to existing customers, so it can't change its long-standing agreement with them. Existing customers who don't re-mortgage or re-negotiate when the deal ends will get the benefit of the 2% guarantee.

However, if these customers want to re-negotiate to get on a deal again, they will also be put on the new terms regarding the standard variable rate, i.e. they won't have the guarantee. This means all customers who negotiate new deals with Nationwide, whether they're existing or new customers, will still be treated equally.

This has happened before

A similar complaint happened three years ago. Nationwide started offering different deals to first-time buyers and to re-mortgagers. This was reported as offering different deals to new and existing customers, but that's not correct. It was offering the same deals to both new and existing customers who were re-mortgaging, so it was in fact keeping its promise by offering the same deal for each type of mortgage to all customers.

Why Nationwide is making this change

I'm not a mindless fan of Nationwide. It has both positive and negative points like many financial companies, but the criticism here is misguided.

The change three years ago and the one today are sensible changes that keep Nationwide as competitive as possible, and serve to protect the broadest number of its customers. The steps being taken mean that Nationwide may be able to offer better deals to its savers. Nationwide has been extremely competitive on standard rate mortgages and trackers lately, but that means its getting less money to pay to its savers.

These steps mean that it can treat its entire customer base more fairly.

And anyway...!

It's extraordinary that so many company spokespeople and journalists are up in arms about the idea that a financial company might be offering better deals to existing customers than new customers. These same people probably also complain that loyalty isn't rewarded and that new customers get all the best deals!

Does this mean higher standard rates in two years' time?

Nationwide insists that this just gives it flexibility. It doesn't have any plans yet, as it doesn't know where it'll be in two years when the first new contracts will revert to the standard variable rate. These are sensible steps and, after the past ten years, people should be happy that a lender is behaving sensibly.

The money bit

Finally, it's been a bit crazy over the past year, with SVRs lower than introductory deals, but in normal times the introductory deals are better, so this will likely be irrelevant to anyone who's able to re-mortgage or re-negotiate in 2011. Most older customers who then decide to stick with the SVR will probably be paying more than a new customer, or an existing one who re-negotiates.

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