One in seven customers still paying the loyalty penalty

1st August 2022

One-in-seven customers are still paying the loyalty penalty across the broadband, mobile and mortgages markets in the midst of a cost-of-living crisis according to latest Citizens Advice research,

The charity found two-fifths of people (41%) who are paying the loyalty penalty have struggled to sleep due to their finances. Three in 10 (28%) have already cut back on everyday essentials such as food and energy, and 65% are worried about keeping up with their bills.

Analysis of 165,000 budgets of people who came to Citizens Advice for debt help, found those with the lowest incomes spend almost double the proportion of their income on telecoms than the highest earners.

Citizens Advice is calling on the regulators to finally tackle the loyalty penalty across the broadband, mobile and mortgages markets. It says no-one should be punished for being loyal in the midst of a cost-of-living crisis.

In September 2018, Citizens Advice submitted a super-complaint on the loyalty penalty, in the mobile, broadband, home insurance, mortgages and savings markets. By 2020, the sectors’ regulators had found a combined loyalty penalty of £3.4 billion every year.

In January this year, the Financial Conduct Authority (FCA) essentially abolished the loyalty penalty for car and home insurance, by banning price walking – gradual year-on-year price increases – and making companies automatically switch their customers to better deals. It has paused investigating the cash savings market.

But Citizens Advice is concerned that little meaningful action has been taken in the three other markets it previously identified as having a problem. Regulators found annual loyalty penalties of £800 million for mortgage holders, £451 million for broadband customers, and £83 million for mobile customers paying a bundled contract including a handset.

The charity warns consumers are paying a high price for this inaction, in the midst of a cost-of-living crisis, if a customer pays the loyalty penalty across all three markets this could cost £1,144 a year, equivalent to more than half of the current energy price cap. The £95 monthly cost of the loyalty penalty is equivalent to 17 days average energy use.

But of those paying the loyalty penalty, 18% said it’s too difficult or time-consuming to switch, and a quarter of a million (3%) didn’t even know they could.

Dame Clare Moriarty, Chief Executive of Citizens Advice, said “The government did the right thing by strengthening its cost-of-living help, but finally fixing the loyalty penalty could put more than twice as much money back in some people’s pockets as the £400 October energy grant.

“As we all pull together to weather the cost-of-living crisis, it’s incredibly frustrating to see there are still firms out there that prefer to help themselves than help the people who’re most in need.

“The time for piecemeal pledges has passed. Regulators must tackle the loyalty penalty across these three markets – no more excuses, no more delays.”


Loyalty penalty cost per person per year

Action taken since 2018

UK adults paying the loyalty penalty during the cost-of-living crisis



⬤ FCA – no action




⬤ Ofcom – some voluntary commitments from firms

1.5 million



⬤ Ofcom – some voluntary commitments from firms

7 million