Standing in the queue of my local bank recently I overheard a frank and honest confession from the assistant serving the customer in front of me. Aside from carrying out what he needed for that day’s transactions, he told her that his current fixed rate mortgage deal was coming to an end and he was about to be put onto the bank’s standard variable rate mortgage scheme. He was asking her to help him compare current mortgage rates for him and suggest a suitable remortgage.
Banks being banks and progress being what it is of recent years, the clerk and no-one else in the bank branch was able to help. Her answer was for him to call the Customer Retentions team. Doesn’t that say a lot about the bank – not Customer Care or Customer Relations Department, Customer Retentions. A team dedicated to keeping customers, rather than looking after us, treating us as valued customers and giving us a service that we enjoy. But that is straying from the point.
Her suggestion to him was that with base rates currently so low and likely to drop further, that the variable rate mortgages offered by the bank were probably about as low as he could get. Fixed rates wouldn’t drop with further rate cuts and one came only days later. Capped rates were charging the same as variable rate mortgages and trackers weren’t likely to follow future base rate cuts any further for the foreseeable future.
She still gave him the number of the Customer Retentions team to speak to, but suggested that the best answer would be to accept the variable rate offered to him and keep an eye on mortgage rate changes. Let the base rates drop a little further, basically to rock bottom, and then see what’s on offer. The problem with fixed rates at the moment is that no sensible bank is going to fix a low rate for 2, 3 or even 5 years, when they hope that within that time the recession will be over, the economy will have recovered and base rates will be shooting up. If rates are likely to climb in the near future, they don’t want to be locked into a rate where customers are paying back drastically less interest to borrow money than it is costing them to supply it.
I’m sure it doesn’t often happen, but currently we are seeing a very strange situation with borrowing interest rates. To be told that rather than compare mortgage rates just to accept the bank’s standard variable rate mortgage offered is very unusual. But, if it saves the customer money, why not? I don’t know what the customer decided to do when he got home, maybe he phoned the Customer Retention team or maybe he decided to speak to an independent mortgage advisor who would give him a view of the whole market. Personally, I’d have tried doing both.
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