Mortgages -
Halifax Insists on Current Account for Mortgage Borrowers - 11/05/2008
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Those with small deposits who do not use a broker will from today be forced to open a current account before they can get a mortgage, Britain’s biggest mortgage lender, Halifax has warned.
The decision, which aims to boost the bank’s cash deposits, could force hundreds of thousands of first-time buyers to switch their banking to the HBOS-owned lender if they want the best rates.
The lender will also raise rates for direct business, despite the fact that the Bank of England kept interest rates on hold last week.
Also, Alliance & Leicester raised rates on some of its deals last week.
Borrowers with a deposit of less than 10 per cent of the value of the property would be forced to open a High Interest current account, which requires a monthly deposit of at least £1,000.
Alliance & Leicester and HSBC offer preferential rates for current account customers, but Halifax has gone a step further by refusing to lend at all, except one opens a current account.
“Wholesale money continues to be significantly more expensive than a year ago. Unfortunately, this increased cost needs to be passed on to new customers,” said a Halifax spokesman.
The High Interest account pays 5.12 per cent on credit balances of up to £2,500. The rate, however, falls to 0.1 per cent above that.
Even though the account has one of the highest rates on the market, experts have expressed concern that borrowers, after taking out the Halifax mortgage, would come under pressure to upgrade to expensive fee-paying account that generates revenues.
75 per cent of the 1 million HBOS customers who opened current account last year took out the Ultimate Reward Account, charging them up to £120 a year.
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