MOST mortgage-holders are being forced to subsidise the sweet-deals offered by banks and building societies to win new customers, according to Consumer Choice magazine.

Its survey of the Republic's 13 main lending institutions shows that existing customers at ACC Bank, Irish Nationwide, National Irish bank, Norwich Irish Building Society and Ulster Bank are the only ones not affected by the widespread special discount deals.

In some cases, Consumer Choice claims, existing mortgage holders are paying between 4 per cent (Irish Permanent) and 14.6 per cent (Bank of Ireland) more in cash terms on their mortgages than new customers taking up the discounted rates.

A new Bank of Ireland customer with a £50,000 mortgage over 20 years on a special, low variable rate pays £612 less in the first year than an existing customer with the same mortgage, the report finds.

Similarly, a new customer taking out a five-year, fixed rate £50,000 mortgage at the EBS, First National or the ICS building societies will pays £480 less than a corresponding existing customer.

Consumer Choice's research also shows that slightly more than half (55.6 per cent) of new mortgage customers are opting for fixed rate mortgages, while 44.4 per cent take up the variable rate option.

At a time of low inflation, it suggests, mortgage holders would be wise to look to reducing the outstanding balance of their mortgage, either by making occasional lump sum payments or increasing monthly repayments. But it warns that in many cases, banks and building societies will impose hefty penalties for the early redemption of a mortgage. The survey finds that, with the exception of Bank of Ireland and the ICS building society, customers with fixed rate mortgages lace substantial penalties, even when only small amounts are paid off the loan. Both of these institutions allow a reduction of up to 10 per cent on the outstanding balance in any 12-month period, without incurring a penalty.

Among those surveyed, redemption fees vary from £15 (AIB) to £156 (Norwich Irish), it says.

To get around this, it recommends that customers should consider splitting their mortgage into two separate accounts, one at fixed rate of interest and one with a variable rate. "The variable account can be used for accelerated capital repayments without penalty" the magazine suggests. However, not all lenders permit such a dual account arrangement.

Another potential pitfall high-lighted for mortgage holders in the survey was the possibility of being penalised on their fixed rate mortgage when they decide to move house.

Three institutions - First National, Irish Nationwide and Norwich Irish - do not allow customers to carry over their mortgages on to a new house, triggering a redemption fee. Both First National and Irish Nationwide, however, would refund this cost if the mortgage holder stayed with them, the survey said.

Customers moving from a variable to a fixed rate mortgage must in some cases pay a switch fee, which can range from £50 (AIB) to £175 (Ulster Bank), according to the survey.

The survey clearly showed that many customers were not getting equal treatment, it said.