It pays to be disloyal: time to ditch those old deals

Laura West-Wilson is proud to describe herself as disloyal — it has saved her hundreds of pounds.
She has pocketed £750 in bonuses by switching bank accounts over the past year, netted £50 for moving energy supplier, and saved £120 by changing her broadband.
West-Wilson, 35, from southeast London, has put the money she saved towards her wedding and honeymoon in Borneo. “I’m good at keeping on top of the admin. I set up reminders on my phone for when my deal or contract is expiring or something needs renewing,” she said. “I think we’ve had a different car and travel insurer every year for about five years.”
When it comes to the household finances, disloyalty pays. Those who do not shop around each year for insurance, haggle with their suppliers or take advantage of switching bonuses and introductory offers are losing out.
“Loyalty only makes sense if the company you are loyal to is on your side, otherwise it really doesn’t pay. In fact it probably costs you hundreds or even thousands of pounds a year,” said Greg Marsh, the founder of Nous, an app that helps customers keep track of household bills. “We have seen people save more than £750 a year on their mobile phone alone. They had taken out a contract, stuck with the same company for years, and never realised how much they were overpaying.”
Switching bank accounts can be one of the easiest ways to pocket some free cash. Banks regularly offer bonuses of up to £200 to attract new customers and deals available now include £200 to switch to a Club Lloyds account, £180 to switch to a NatWest Reward account and £175 to move to First Direct’s 1st Account. Despite that, 54 per cent of 2,001 people surveyed by the financial research site Finder UK in August said they had never moved bank accounts.
The Competition and Markets Authority estimated in 2020 that 28 million people paid a combined loyalty penalty of £3.4 billion a yearon phone, broadband, savings, mortgages and home insurance deals.
New rules have been introduced since then that require companies to tell customers when their deal is ending and insurers are banned from offering cheaper deals to new customers. But many are still losing out. So how much is the loyalty penalty costing you?
It’s time to get back into the habit of looking at our energy bills. Before 2021, about 10 million households switched their energy supplier every year, according to Ofgem, the energy regulator.
That all changed when a European gas shortage in 2021 and Russia’s invasion of Ukraine in February 2022 sent energy prices soaring. Some 28 suppliers went bust between January 2021 and April 2022 and competitive fixed rate tariffs all but disappeared as firms struggled to set prices that would keep them in business. Households were told to stay on their supplier’s standard variable rate, which is controlled by Ofgem’s energy price cap.
• Compare energy deals
The cap, set every three months, limits the prices suppliers can charge per unit of gas and electricity to customers on the standard tariff. It went from what worked out at £1,277 a year in October 2021 for a dual-fuel household with average usage paying by direct debit to £4,279 in January 2023. The government was forced to step in and subsidise bills through its energy price guarantee, which cut average annual bills to £2,500 between October 2022 and June 2023.
Unsurprisingly with so few fixed deals to choose from, the number of energy customers switching fell to 1.5 million in 2022, although it did more than double to 3.2 million last year, when the price cap started falling.
“Too many households have got used to letting the price cap dictate their energy bills, but staying on a default tariff could be costing millions of people a lot of money,” said Will Owen from the comparison site Uswitch.
The price cap was down to £1,568 in July but went up 10 per cent last month to £1,717 a year and suppliers are finally starting to offer fixed rate deals that beat it.
There are 23 fixed deals that work out up to £120 cheaper than the price cap over a year, according to Uswitch. The cheapest is a one-year deal from Outfox the Market that would cost £1,597 a year for the average household’s usage. It has exit fees of £50 per fuel. The cheapest tariff without exit fees is £1,645 from EDF Energy, £72 less than the price cap.
While companies have been told by the Financial Conduct Authority, the City regulator, not to charge loyal customers more than new ones, readers are still saying that their renewal quotes have soared.
Sam Richardson from the consumer group Which? said: “We have heard from numerous people who, after shopping around before renewing, found that their insurer’s offer wasn’t actually its best price.
“This is likely to be because insurers can offer different prices depending on how you get your quote — for example by phone, directly online or via a comparison website. So there is still often an advantage to behaving as a new customer and seeing what quotes your insurer will give you.”
The average combined home insurance policy cost £396 between April and June, according to the Association of British Insurers, up 20 per cent from £329on the same period last year. Average fully comprehensive motor insurance cost £612 between July and September, up 9 per cent from £561.
A survey by the comparison site Confused.com suggested that 75 per cent of those receiving renewal letters between January and March were quoted an average of £94 more. Of those, 45 per cent saved an average of £184 on the renewal price by switching — even paying an average of £90 less than they had the previous year.
Luckily, this is one area where many are happy to be disloyal. Some 61 per cent of 28,604 customers questioned by the research firm YouGov last year said they were “active” or “very active” in shopping around for insurance, with 10 per cent “inactive”. The sweet time slot for getting the lowest quote is 26 days before renewal. It becomes more expensive the closer to the policy start date you leave it.
Make sure to compare like-for-like when shopping around. More insurers are offering “basic” or “essentials” policies without courtesy cars, breakdown or windscreen cover that used to be included as standard. You may have to pay extra for these, or the policy may come with a higher compulsory excess, but don’t pay for add-ons you won’t use.
About 300 of the 2,000 people (15 per cent) surveyed by YouGov in August had changed broadband supplier in the past 12 months, and 13 per cent had switched mobile phone company.
Some 26 per cent of broadband customers and 34 per cent of phone customers were out of contract at the end of June last year, according to the regulator Ofcom. This means they were free to switch without penalty, but hadn’t, even though firms have been required since 2020 to warn when a contract is ending and tell customers how much they could save by signing up to a new deal.
Nous said the average out-of-contract broadband customer was paying £38.03 a month and the average mobile phone customer £25.98, based on data from its 375,000 customers.
You can get ultrafast broadband from Virgin Media for 18 months with average download speeds of 132 megabits per second (Mbps) for £22.99 a month and a two-year contract for £23 a month from Vodafone with average speeds of 67 Mbps.
If you do not need a new phone, consider a Sim-only deal. iD Mobile, which uses Three’s mobile network, offers 100 gigabytes of data a month for £10 a month on a rolling deal.
Your home loan is usually your biggest financial commitment by far, so it’s crucial to get the best rate. Yet UK Finance, a trade association, said that about 90 per cent of borrowers stick with the same lender when their deal ends.
These product transfers are less hassle because the lender already knows you so the checks are less stringent than if you change firm and the fees and rates can be lower than those offered to new customers.
• Compare mortgage deals
Chances are that there are better deals with other lenders, so it may pay to shop around to see if the saving is worth the extra hassle.
The lowest five-year fixed rate from a big lender this week for someone remortgaging with a 40 per cent deposit is 4.09 per cent from Nationwide Building Society with a £1,499 fee, available at up to 60 per cent loan-to-value.If you are already a customer of HSBC or Nationwide, you can get better deals. HSBC has a 4.03 per cent five-year fix with a £999 fee while Nationwide offers its customers 4.09 per cent with the same fee — £500 less than for new customers.
“Many people would only choose to move lender if there was a significant difference in the rate,” said Chris Sykes from the mortgage broker Private Finance. “However, if you previously used a specialist lender, perhaps because you were self-employed, and that is no longer the case, then the saving could be extreme if you can now use a standard lender.”
Julia Brennecke is such a keen saver that she once moved from Norwich to Aberdeen to reduce her rent, so she was horrified to discover that she was overpaying for her phone and broadband.
Brennecke, 34, took out a contract with EE ten years ago, paying £28 a month for broadband and the same for her mobile phone. Since then, the monthly costs have increased to £33 for broadband and £40 for her phone.
In July she had a notification through her Nous app that she could be paying less and after checking online reviews she switched to the broadband supplier Zen and has cut her bill back down to £28, saving £60 a year.
“It doesn’t sound like a lot, but over a two-year contract it’s nothing to be sniffed at. It has opened my eyes to the costs that can mount up if you’re not careful,” she said. “Now I’m excited to switch my mobile phone contract next month. I have seen Sim-only deals for about £5 a month.”