Customer choice? It's an illusion, as mortgages disappear

Choice has always been the one saving grace of the UK financial services sector. Gross and frequent mis-selling, a regulator not up to the job and some appallingly priced products have always been mitigated by the fact that if you're a savvy consumer and, in that phrase beloved of hacks, "shop around" you can get an amazing bang for your buck in the UK. It's possible, if you know where to look, to get savings interest well above inflation, purchase goods on a credit card that actually offers cashback, and invest in funds easily with little hassle and no upfront charge.

But as far as the mortgage sector is concerned, the credit crunch is doing for choice. And it's getting worse. We had 16,000 mortgages before the crunch – far too many and representing the mad lending that was going on. We now have a touch over 3,000, with nearly 1,000 disappearing in the past fortnight according to Moneysupermarket.com. That still sounds like a lot of choice. But drill down further and this choice is illusory.

Only about half a dozen banks and building societies are really lending, the rest may ostensibly have products available but they are deliberately over-priced to deter. In addition, a good third of the mortgages are only available directly from the lender, which is in effect cutting the legs from under the brokers. I expect many of these broking firms to join estate agents in liquidation soon. Long term, this is going to hamstring choice and although there were plenty of brokers out there who have only brought this on themselves by fuelling the debt boom, we are now in danger of throwing the baby out with the bath water. Put simply, since the bank bail-out and despite the sabre rattling of the Government, things have got worse for mortgage borrowers rather than better.

Migration misery

My bank announced it in September to the media, but finally HSBC has chosen to show me the courtesy of writing to me as a customer to let me know that it will stop paying credit interest on its current account from 1 December. The letter, in its own way, is a bit of a stunner, an exercise in double-speak at which only marketing departments truly excel.

The letter tells me that next month I will be migrated – lucky me – from my old bank account to something grandly called Current Account Advance. I am being transferred because the bank "values your relationship with us". But about three-quarters down the page there's the rub: "Many of you said that you'd prefer better savings products than getting a very ordinary 0.1 per cent to 1.25 per cent rate of credit interest on a current account. So we won't be paying credit interest on Current Account Advance. Instead, you will be eligible for one of our highest-earning savings accounts, the Regular Saver."

Let's look at that statement in detail. The bank claims that customers don't value interest paid on a current account. I asked HSBC how it came to this conclusion and was told that it had conducted focus groups and interviewed thousands of people. These people (please contact me if you're one) said, apparently, that they valued good savings accounts very much and credit interest on current accounts only a little. How did they frame the question, I wonder? A clue to what may have gone on is in HSBC's own description of the rate it pays at present as "very ordinary". Can I suggest that if it had paid a proper rate of interest like some of its rivals – the best buys are all above the 3 per cent mark – maybe customers would value it a little more? What's more, is it right for a bank to say to its customers: in order for you to have access to a decent regular savings account we're going to stop paying you interest on your current account? Why not do both? All the polite staffer at HSBC's call centre could do was "apologise for any inconvenience caused" a lovely catch-all phrase used by organisations when they are telling you, basically, to lump it. What I should do is exercise my choice to leave and go elsewhere. At least when it comes to current accounts there is still some choice.

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