Are you a business wanting to reduce your customer base?
Take a tip from Bank-Of-Ireland-owned Bristol & West... give them a "goodbye kiss" in the form of a financial incentive to leave!
Admittedly, "too many customers" is an odd conundrum that won't apply to many businesses. It takes being a lender in a credit crunch to arrive at a situation like this. Bristol & West simply has too many loans on its book, all of which need to be properly balanced against capital (at least, that's the case now that a modicum of sense has returned to banking).
So in order to persuade 1,400 borrowers to take their loans elsewhere, BoI has offered to waive Early Repayment Charges of up to £5,000 on fixed-rate mortgages that are due to expire over a year's time.
It has also asked broker London and Country to assist these customers by taking them through their options!
Generosity or pure pragmatism?
Undoubtedly this move is sensible and probably not that costly to Bristol & West. It helps parent company Bank of Ireland avoid thorny funding problems, and it wouldn't have expected to collect those fees anyway. However, it will lose out on the interest on those deals, which would have been up to 5 per cent above the base rate.
Some borrowers will be delighted to get the chance to switch without penalty at a time of remarkably low rates. Just one caveat, though: that assumes that new lenders will value their homes at least ten per cent, preferably twenty per cent higher than their loans. Otherwise this golden opportunity might have to pass.
And if you're convinced this is a generous move from Bank of Ireland, compare this move with GMAC-RFC's £25,000 farewell gesture to some of its customers trapped on awful mortgages a year ago!
There's no clear moral of the story for borrowers, but for lenders it's obviously been bad news to take on more customers than their parent operations can comfortable support.