The seven banks and one building society featured in the report spend a staggering pounds 90m on mailshots every year. This is how they do most of their "cross- selling": flogging insurance, investments and mortgages to customers who probably start with a current account at the bank.
The report showed how two sample households could spend pounds 1,000 more than the "'best buy" rates if they bought a mortgage plus all their insurance, credit cards and personal loans from the bank. Barclays and NatWest came off worst. Barclays' personal loans were described as a "rip-off", with a pounds 5,000 loan over three years costing pounds 920 more than the "best buy" deal from Direct Line. About half of this is taken up by charges on loan insurance, which banks are keen to sell you as it makes them lots of extra money.
The Nationwide did best in the survey. As Which? pointed out, it is a building society and can operate on lower profit margins than a bank with demanding shareholders to satisfy.
Which? described buying this overpriced stuff as "misguided loyalty" on our part. But that's doing us a big favour. Most of us buy from a bank because we are too apathetic to look elsewhere for a mortgage or whatever else we need to sort out home finances in a hurry.
We in the UK haven't developed that peculiarly American passion for shopping around (preferably on the internet) for the best deals. We have been sitting around paying over the odds for pretty much everything for years, but when it comes to financial services there is something we can do about it. Be aware. Have a look at the best savings rates in the papers each weekend. Check websites such as The Exchange (www.exchange.co.uk) and Moneyworld (www.moneyworld.co.uk) to keep up with the latest changes.
The banks know their deals aren't brilliant. The concept of bancassurance (a bank selling its own investments and insurance to captive customers) has not been the success they were hoping for. Why else do you think they are trawling round for decent brand names? No wonder NatWest has swooped on Legal & General: the insurer has captured a big slice of the low-cost insurance and investment market. If NatWest can get L&G products in its branches, it will have a lure for new as well as existing customers. Friends Provident and Equitable Life, two other prestige insurance names, are the subject of persistent takeover rumours.
Meanwhile, life insurance and pensions from Scottish Widows will join Cheltenham & Gloucester mortgages on sale inside Lloyds TSB branches. C&G mortgages came out quite well in the Which? survey. Let's hope replacing rip-off bancassurers with in-store big names will offer better deals for (lazy) customers.