Cantillon: new Bank of Ireland mortgage wheeze does not reward loyalty

A new mortgage wheeze from Bank of Ireland calls to mind observations by Senator Feargal Quinn on loyalty to the customer or the lack thereof.

The bank has declared it will pay owner-occupiers 1 per cent of their mortgage amount if they switch their home loan to BofI. “The 1 per cent payment, which is not capped, is designed to cover legal and property valuation fees associated with switching – for example, a homeowner switching a €200,000 mortgage to Bank of Ireland will receive a payment of €2,000.”

That’s no small thing. But it is line with a practice now well-entrenched in an assortment of sectors in which goodies are dished out to newcomers while clients already on the books pay the full whack in spades with little to show for their fealty.

BofI has reduced its fixed rates of interest a little, but some customers had their variable rate increased if they opted not to fix. This comes when European Central Bank rates are a record low, yet all Irish banks continue to extract a huge margin from mortgage-holders who do not have the benefit of tracker rates.

It was many years ago but Cantillon still remembers Quinn telling marketing graduates of a promotion by the Economist magazine in which new subscribers were offered big discounts while people renewing their subscription had to pay the full fee. This was not the correct approach at all, he argued.

The lesson was clear enough. Don’t expect disloyalty to be repaid with loyalty.