Mortgages, current accounts, credit cards - best bank deals

By Adam Aiken on January 14th 2010

Your bank will want you to sign up to several of its products, but it's important that you shop around for the best deals, says Adam Aiken.

Having a friendship with your local bank manager may be one of the many things from yesteryear that has lng since disappeared, but the banks are as keen as ever to get more of your business – even if it does involve dealing with sales people based in call centres thousands of miles away.

Cross-selling – the idea that once a customer has signed up for one product, he or she might then sign up for more from the same provider – is nothing new, but recently the banks have increased their efforts to be what data analysts Defaqto call “one-stop shops”.

“We’ve already seen banks focusing their unsecured lending on their existing customers but now there is the beginning of a trend to target mortgage lending in the same way with a series of special mortgage offers available exclusively to current account customers,” said David Black, a banking specialist with Defaqto.

“Banks see the current account as the main relationship builder with the customer and it also enables them to have a much better understanding of the financial capabilities of each customer.

“The cross-selling of other products on to the existing customer base is destined to become the key battleground as each bank strives to become the one-stop shop for all the personal finance needs of their customers.”

Mr Black said Halifax – part of the government-owned Lloyds Banking Group – was the latest big name to join the trend of targeting current account customers with special deals on other products. But he said that many of the smaller providers, particularly in the building society sector, did not offer current accounts and so were unable to compete in such a way.

Despite what may look like a good deal, Mr Black said it was still crucial to shop around.

“Just because the rate offered by the special deal is slightly below the standard rate available to non-current account customers, it does not necessarily mean that you cannot get a better deal elsewhere,” he said.

“People should shop around for the best deals as loyalty does not necessarily pay.”

Andrew Hagger, PR and communications manager at Moneynet.co.uk, agreed.

“Whilst you may feel quite pleased to be thought of as a valued customer when your bank writes and offers you a discount on a mortgage or a better rate on your savings account, don’t make the mistake of signing on the dotted line without checking out the rest of the market,” he said.

“A discount on an uncompetitive product is unlikely to be sufficiently large to transform it into a market-leading best buy. It’s more likely to move it from being a poor deal to being something very average – and who wants to buy anything that’s just average?

“You may think the odd 0.2pc on a mortgage doesn’t make much difference, but with many people borrowing six-figure sums these days, you’re not talking about just a few pence.

“A £100,000 mortgage at 4.7pc as opposed to 4.9pc, for example, will save you £11 a month, or £660 over five years – more than enough of a reason for most people to forget about being loyal to their banks.”

Mr Hagger said the same mentality applied to bank “sales”, such as the one currently being run by HSBC.

“As with January offers from any retailer, don’t be tempted to rush in and buy financial services products just because they are in a sale,” he said.

“Even though the terms may have been improved, it doesn’t mean they are the best deals for you.

“Bank sales are little more than marketing gimmicks. Most customers would prefer consistently good deals from their providers, rather than for just a few weeks each year.”

Some of the cross-selling promotions

Mortgages

Abbey offers free valuations and cashback on certain mortgages to Abbey or Alliance & Leicester current account customers.

Halifax offers between 0.2pc and 0.4pc off certain mortgages to its current account customers. For example, its two-year fixed-rate mortgage with a £995 fee (60pc loan-to-value) is reduced from 3.99pc to 3.69pc for current account customers.

HSBC offers its HSBC Plus and HSBC Premier account customers a 0.15pc discount off the standard rate of selected mortgages. For example, its two-year fixed rate mortgage with a £599 booking fee (maximum 75pc loan-to-value) is reduced from 3.99pc to 3.84pc.

Nationwide Building Society is offering 90pc mortgages to its Flexaccount customers.

Natwest offers some preferential mortgage rates to its Advantage Private, Advantage Business and Advantage Gold customers. For example, discounts of 0.05pc or 0.1pc (depending on the account held) are available on its standard 3.99pc two-year fixed-rate mortgage, which has a £999 product fee and is available up to 75pc loan-to-value.

Royal Bank of Scotland offers similar discounts to Natwest for its Royalties Private, Royalties Business and Royalties Gold customers.

Current accounts

Abbey will be offering its Zero current account exclusively to its mortgage customers.

Credit cards and unsecured loans

Halifax offers an additional three months at 0pc on purchases (for 12 months instead of nine) to its current account customers.

HSBC’s credit cards and unsecured loans are available only to its current account customers.

Natwest’s credit cards and unsecured loans are available only to Natwest current account customers.

Nationwide Building Society is offering a market-leading unsecured loan at 7.6pc for loans of £7,500-£14,000 for up to five years to its current account customers.

Royal Bank of Scotland’s credit cards and unsecured loans are available only to its current account customers.

Savings accounts

Halifax offers an extra 0.2pc on a range of variable-rate savings products to its current account customers.

First Direct, HSBC, Lloyds TSB and Norwich and Peterborough Building Society offer regular monthly savings accounts that are available only to their current account holders.

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