The price of being a loyal customer

Whether its energy, insurance or your mortgage – sticking with the same provider over time can have hidden expensive consequences.

customer loyalty con

The Competition & Markets Authority has published the results of its investigation into a super-complaint by Citizens Advice into the penalties paid by customers who stick with the same providers – instead of regularly shopping around.

It investigated:

  • Cash savings
  • Mortgages
  • Insurance
  • Mobile phone contracts
  • Broadband

The findings

It found that firms use an array of approaches to make it difficult for customers to leave – while at the same time quietly raising prices or tweaking the interest rate for long-standing customers.

The investigation called for the targeted price caps for the most vulnerable, and a crackdown on harmful practices. It also wants regulators to publish details of the penalties people pay for sticking with their old provider in each market – and for each supplier.

In the savings market it welcomed the idea of a basic savings rate – an FCA proposal for a single rate applied to all long-term customers. However, it added that if this isn’t successful, the FCA should consider introducing a floor, below which savings rates would not be allowed to fall. It also suggested more work is done on whether collective switching is feasible

“We’re astonishingly attached to old providers, and as a result, the CMA found we waste an eye-watering £4 billion a year, explained Sarah Coles, a personal finance analyst at wealth managers Hargreaves Lansdown. The biggest waste of money of all was in savings accounts – accounting for £1.1 billion of this waste – followed by £1 billion in broadband, £0.8 billion in mortgages, £0.7 million in home insurance, and £0.3 billion in mobile.

Unfortunately, those who can least afford the extra cost are those who are most likely to end up paying it – as elderly people and those on lower incomes are least likely to switch.

The findings reflect those of our switching study, which showed that 40% of people have never switched their savings account, and 66% of people don’t expect to ever bother doing so in future.

However you don’t have to be a devoted rate chaser to get a better deal. The savings market is innovating and the development of marketplace savings services throughout 2018 has made switching incredibly straightforward. There’s no quiet automatic switching into a ropey rate after your competitive rate expires – because you’ll immediately be alerted, so that with a handful of clicks you can move your money somewhere far more rewarding.

The CMA’s proposals for the savings market support the idea of a basic savings rate – with the potential to introduce a minimum savings rate if it doesn’t work. However, at the moment, this is just a suggestion on top of a proposal, and there’s really no reason to wait around for structural changes moving at a glacial pace, because it’s getting easier to get a better rate today.”

Switching stats

From Opinium Research into the savings habits of 2,008 people for Hargreaves Lansdown

  • Half of people haven’t switched savings accounts for five years or longer – or have never switched at all.
  • Some 40% of people have never switched a savings account or cash ISA.
  • Under a third of people have switched accounts in the past 12 months.
  • Two thirds of people aren’t planning to switch in future.
  • Older people are less likely to switch than younger savers: just one in four (26%) of those aged 55 and over are planning to switch in the next year, while one in three 18-34-year-olds are (32%).
  • Almost half of savers don’t know what interest rate they’re getting
  • Women are much less likely to know what they’re getting on their savings than men – 47% compared with 61%.

Examples of high street easy access rates


Account name

Best rate on £10,000




Birmingham Midshires

Internet Saver






Everyday saver



Everyday Saver


Bank of Scotland

Access Saver



Easy Saver



Instant Saver



Instant Saver


Ulster bank

Loyalty Saver



Flexible Saver



As at 12 December 2018. Excludes accounts with a limited number of withdrawals, those that penalise savers if they make a withdrawal or those requiring a specific linked account

Last modified: December 20, 2018

Written by 1:21 pm News & Views