Banks strive to become one-stop shops

Banks are increasingly focusing on selling products to existing customers whose finances they know more about, according to a new report published on Tuesday.

Many banks have already limited unsecured lending, such as loans and credit cards, to their current account customers, and there is a growing trend for financial institutions to target these consumers for mortgage lending as well.

Halifax has become the latest financial institution to join the number of big high street banks and building societies to offer special mortgage deals exclusively to their current account customers, according to financial information group Defaqto.

These deals range from free valuations and cash-back options, to preferential rates and the chance to borrow a higher proportion of a property’s value.

Halifax current account customers can benefit from a discount of between 0.2 per cent and 0.4 per cent off certain mortgages. For example its two year fixed rate mortgage is reduced from 3.99 per cent to 3.69 per cent for their current account customers.

NatWest is also offerring some preferential mortgage rates to their Advantage Private, Advantage Business and Advantage Gold current account customers. For example discounts of 0.05 per cent or 0.10 per cent (depending on the current account held) are available on their standard 3.99 per cent 2 year fixed rate mortgage

Other banks have flipped this around and are targetting their mortgage customers for more business. Abbey, soon to be rebranded Santander, has a fee-free current account that is only available to its mortgage customers.

Current account customers are also routinely offered preferential rates on savings accounts, as banks focus on cross-selling products.

”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,” said David Black, banking specialist at Defaqto.

”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 the focus by banks’ on exisiting customers fits in with a more cautious approach to lending because it provides them with a better understanding of the financial circumstances of their customers.

However, he said that 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.

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