Banks hate current accounts!
They are annoyingly expensive to run. Statements have to be sent out...cash machines need to be maintained... customers have an irritating habit of coming into a branch and telephoning call centres, which all need to be staffed...
Truth be known, the banks would love nothing more than to charge you for your bank account. They would also love you to take all of your financial products through them. In fact, they would love it if you never shopped around again!
Many banks already offer subscription or premium bank accounts with linked in offers and benefits.
As an example, HSBC offer a Premier Current Account with many different "benefits". To qualify, you must earn over £100,000 a year or hold £50,000 in savings. They reserve the right to charge a fee of £25 a month if you no longer meet the qualifying criteria. All very well and good...
The HSBC website states;
"As a HSBC Premier customer, you can expect the following exclusive benefits and services... Preferential Offers - To help you get more from your money, we provide preferential offers on a range of products."
Aware that loyalty to a bank doesn't necessarily mean you are going to get the best deal, one of HSBC's Premier Account customers asked me to look into his new mortgage for him.
As a Premier account customer, he is taking out a fairly hefty mortgage, over £500,000. He has a 30% deposit. He wanted a longer term fixed rate and had already been offered a rate of 4.99% with the HSBC on 28th May 2010.
Searching around, I've found him a rate with the Woolwich (Barclays), fixed for 5 years at 4.44%.
This is over half a percent less than the HSBC Premier product. The interest saving to our customer on his mortgage is a massive £15,125 over the 5 years compared to the HSBC product.
How many premium current account customers think they are getting the best deal with a "preferential rate" when there may be better offers elsewhere?
Could these accounts be a marketing gimmick to prevent customers from being able to effectively shop around? The European Commission seems to think so.
I am sure the HSBC will be more than happy to arrange some of their life assurance and home insurance at the same time they arrange the mortgage, all of which will generate extra profit!
To obtain the new Woolwich mortgage, our customer didn't need to switch his banking.
If you are looking for a mortgage, don't just look at what your own bank can offer.
And in answer to the question, "Does paying for your current account mean you will get a better mortgage", the answer is not always so!
A "whole of market" mortgage broker can give advice on the most suitable product to meet your needs and demands. They can also look at other offers in the market place to try and save you money.
Oak Tree Mortgages are a whole of market mortgage broker and are available to help you search around the mortgage market and provide you with advice and guidance. We can take care of the paperwork for you and deal with the mortgage lender on your behalf. We aim to save you time and hassle.
(The mortgages mentioned in this article were both available on 28th May 2010).
Your home may be repossessed if you do not keep up repayments on your mortgage
Oak Tree Mortgages is authorised and regulated by the Financial Services Authority
372 Stratford Road, Shirley, Solihull, West Midlands B90 4AQ
