The competition for current account business on the high street is as intense as ever, with financial incentives and preferential deals often being used as bait. With the talk of Virgin Money entering the fray and the likes of Metro Bank expanding, the battle for new accounts is likely to become much tougher.
In the last couple of years there has been more emphasis on trying to retain existing customers; a sensible move – after all, there's not much point in spending a fortune on advertising and marketing to get people through the door, only to then ignore their needs and see them leave for one of your rivals.
Nationwide Building Society has focused on the loyal customer strategy for some time now, and it seems the message is getting through, as the UK's largest mutual attracted over 350,000 new current account customers last year.
This week we saw further good news for Nationwide customers in the form of a best-buy loan rate and a new 7-day notice savings account.
The personal loan deal offers existing customers a rate of just 6.7 per cent APR on loans between £7,500 and £15,000 until 5 July, the lowest rate the mutual has offered since early 2007.
For savers, Nationwide has introduced a new branch-based 7-day deposit account which will pay at least 1.75% above base rate, so currently offering a return of 2.25 per cent. There are higher-paying instant access accounts available, paying up to 3 per cent, but most of these include a 12-month introductory bonus.
It's good to see that existing members are being well looked after, a refreshing change from many deals where the best deals are saved for new customers only.
Mortgage providers offering greater switching flexibility
Uncertainty regarding future interest rate rises has been one of the main factors stopping people from committing to a new mortgage deal when their existing arrangement expires.
Remortgage business has been slow, but increasingly lenders are offering greater flexibility to try to tempt borrowers to sign up for a new deal.
Last October, Barclays, under its Woolwich brand, launched the "Switch and Fix" product range, which allows customers to take advantage of low tracker interest rates now but with the option of switching to a fixed rate mortgage at a later date without incurring an early repayment charge.
Other lenders have followed this trend, and in the last couple of weeks, Yorkshire Building Society and Coventry Building Society have launched their own initiatives.
Yorkshire Building Society has entered the "Drop Lock" mortgage market with two new tracker products priced at 2.29 per cent and 2.49 per cent variable, lower than any standard variable rate (SVR) currently available.
The beauty of this deal is that if the Bank of England Base Rate remains low, then the borrower can choose to remain on their tracker product, and thus take advantage of the low interest rate, but if rates look set to increase they can switch to a fixed rate product without charge.
Borrowers who may be uncertain as to what the future may bring on interest rates also have a new option with the Coventry Building Society "Flexx for term" products. The unique angle with this offer is that unlike some switching packages, where the choice of products may be restricted, with "Flexx for term" you can transfer to any other product including capped rate and base rate trackers as well as short and long term fixed rate mortgages.
Barclays' flexible bond catches the eye
it has been a busy week for new product launches, many of which have being distinctly average, however there were a few new deals that caught my eye.
Barclays launched a two-year flexible savings bond paying 3.2 per cent for 2 years (3.5 per cent on balances of over £50,000). While the rate falls well short of the 4 per cent rate on the standard 2-year fixed bonds from Kent Reliance Building Society and Santander, it does offer a degree of flexibility, with 30 per cent of the capital available for withdrawal without charge if required.
Coventry Building Society has relaunched its popular eNotice online savings account, paying a very competitive 3.05 per cent gross/AER with just 30 days' notice required for withdrawals. The rate does include a bonus for the first year, but this is just 0.5 per cent, far lower than some competitor products, where the bonus accounts for the majority of the overall rate.
Leeds Building Society is offering a new online access account, paying a market-leading rate of 3.05 per cent. The Online Access Account (Issue 4) permits unlimited withdrawals at any time, without notice or penalty. It pays a variable rate of 2.05 per cent, plus an additional bonus of 1 per cent, which expires on 31 January 2012.
Andrew Hagger – Moneynet.co.uk