How will the bank merger affect the consumer?

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The Independent Online

Lloyds TSB today announced a £12.2 billion takeover of its rival Halifax Bank of Scotland but...

Q: What does the move mean for customers?

A: The takeover means that all of the HBOS brands will be owned by Lloyds TSB, although in the short-term customers will see very little difference. HBOS will continue to run its mortgages and savings accounts as normal. In the long-term it is harder to say, as Lloyds TSB has not yet announced whether it will keep all of the HBOS brands, but any changes are likely to be carried out gradually.

Q: Which brands are affected by the deal?

A: HBOS has more than 40 individual brands. The main consumer ones are Halifax, Bank of Scotland, Birmingham Midshires, Intelligent Finance, The Mortgage Business, Clerical Medical, Insight Investment, esure and Shelias' Wheels.

Q: Are my savings safe?

A: Savings are completely safe, both banks are solvent. Consumers are also protected through the Financial Services Compensation Scheme, which pays out the first £35,000 that people lose in the unlikely event that a UK bank goes under.

Today's announcement will also not affect the interest rates paid on accounts in the short term, although in the long term their may be changes once Lloyds TSB has decided which brands it plans to keep.

Q: I have a mortgage with Halifax, what should I do?

A: Continue paying your mortgage as normal. Today's announcement will not affect the rate you are paying. Over time you may receive correspondence from a different administrative department as back office functions for the two groups are combined, but this will not affect the terms of your loan.

Q: I have shares in HBOS that I got when Halifax demutualised, what will happen to these?

A: Lloyds TSB is offering 0.83 of its shares for each HBOS share, valuing them at 232p each. If the deal goes through, it means shareholders will effectively swap shares in HBOS for ones in the enlarged Lloyds TSB Group.

Q: Will my local Halifax branch disappear?

A: Nothing will change immediately and it is still very early days, but Lloyds TSB has said there will be "elimination of branch duplication", suggesting that branches will only be closed if an HBOS and Lloyds TSB one serve the same area.

Analysts have also estimated that as many as 40,000 jobs could be lost from the banks' combined 145,000 staff.

Q: What impact will the takeover have on the mortgage market?

A: The move will combine the UK's biggest mortgage lender and the country's third biggest one into a single group. This is likely to lead to a reduction in competition which could be bad news for consumers. There are also concerns that the enlarged group will cherry pick the best customers, making it harder for people with small deposits or adverse credit histories to borrow.

However, the UK mortgage market is highly competitive and there are other large lenders who will be looking to boost their market share following the takeover.

There could also be an impact if Lloyds TSB brings the HBOS mortgage brands into its own. Lloyds, through its lending arm Cheltenham & Gloucester, currently has slightly better rates than Halifax on the whole, but Halifax still lends to people with just a 5% deposit, whether C&G demands one of at least 10%.

Q: What about savings rates?

A: Halifax probably has the edge over Lloyds TSB on the savings rates it offers. But with the current problems in the wholesale money markets all lenders are more reliant on using savers deposits to fund mortgages. As a result they are keen to get savers' money through their door, and this is likely to mean that rates remain competitive for the foreseeable future.

Q: Is the takeover a done deal?

A: No, it still needs to be approved by shareholders and ratified by City watchdog the Financial Services Authority.

But HBOS is recommending that its shareholders back the deal and the Government has said it will waive competition rules to get the transaction through on public interest grounds.