How the Lloyds / HBOS merger affects us
One of the most dramatic manifestations of last week's turmoil in the financial markets was the shock merger of mortgage lender Halifax Bank of Scotland (HBOS) into High Street rival Lloyds TSB.
Shock merger: The tie-in of Lloyds TSB and HBOS will affect millions of savers
While some issues have been settled, many pressing questions remain. Financial Mail explores the consequences for the millions of customers of the massive new conglomerate.
Is this a done deal?
The deal will take three to four months to conclude. HBOS shareholders will be asked to vote on the merger and there are rumbles that some big institutional shareholders are not happy. They feel HBOS directors ' bottled it' and could have tried harder to stay independent.
That sentiment may be shared by many of HBOS's 2m small shareholders, who have seen the value of their shares plummet in the past 18 months.
However, with financial markets shaken by a brutal week, there appear to be few alternatives for HBOS at the moment.
What will happen to Lloyds and Halifax branches?
Culling bank branches is a core part of Lloyds TSB's plan to save £1bn a year in running costs through the merger.
Lloyds already has the biggest branch network of any UK bank, with 1,900 branches. Merging with HBOS would give it about 3,000 outlets.
Clearly, many branches close to each other would close. But Lloyds TSB has a record of savage branch cuts - so there are fears that it may use the integration process to cut more.
Will there be any impact on my mortgage?
There will be no change for existing mortgage borrowers. You will still owe the same amount on the same terms.
But the type of deals offered in the future will be likely to change.
Over the past few years Lloyds TSB (which lends through its subsidiary Cheltenham & Gloucester) has been more conservative in its lending than HBOS.
Existing customers of Halifax or HBOS-owned Birmingham Midshires who need a mortgage with a high loan-to-value or have a poor credit history may find they need to go elsewhere when their deal ends. A similar process has been happening to customers of Northern Rock.
What will happen to my savings?
In the short term, nothing. In the longer term banks may well rearrange their savings accounts to simplify their product range.
Historically, Lloyds has offered worse deals for savers than HBOS (read Bill Jones's account, below).
A key question is how any merged bank will arrange its banking licences. The Financial Services Compensation Scheme gives protection on deposits of up to £35,000 for each banking licence held.
HBOS has a single licence to cover deposits with Halifax, Bank of Scotland, Birmingham Midshires, AA Savings, Saga and Intelligent Finance.
At Lloyds TSB, the two main savings brands, Lloyds TSB and Scottish Widows, are covered by just one banking licence.
And what about my investments?
The banks already own several of the biggest names in investment.
Lloyds controls Scottish Widows while HBOS has Clerical Medical, Insight Investments and a big slice of upmarket investment firm St James's Place. Together they are expected to account for about £1 in every £8 of new investments.
Again, in the short term nothing is likely to happen. But a full merger of these operations or a piecemeal sell-off is almost certain.
What about borrowers with Bank of Scotland Shared Appreciation Mortgages (Sams)?
No respite; Sheila Jones has a controversial HBOS Sams mortgage
Unfortunately, the merger means continued uncertainty for those elderly homeowners who took out controversial Sams with Bank of Scotland over a decade ago.
These corrosive loans entitle the bank to the lion's share of any growth in the value of the property. And ballooning house prices over the past ten years have left pensioners trapped in unsuitable homes, unable to sell because there would be insufficient cash left to buy an alternative property once HBOS has taken its cut.
Financial Mail has campaigned on behalf of borrowers such as Sheila Jones, whose original £44,000 debt grew to £290,000 in just ten years.
Litigation against HBOS by lobby group Safe was being mounted before the merger.
Safe's Elaine Williams insists it will go on. Visit safe-online.org.
What about savers and borrowers with OTHER banks?
Halifax has been a traditional leader in mortgages, though Abbey took its crown as the top lender earlier this year. Putting Lloyds-owned Cheltenham & Gloucester with Halifax would create a mortgage monolith, looking after more than one-in-four home loans in the UK.
A deal would also bolster Halifax's position as the top home for savings. Together the banks would have more than £400bn of customer deposits and about 35% of the market for current accounts.
In the past, any merger would have been barred because of fears of the giant bank dominating the market. But the Government has said it is willing to waive competition rules in the interests of financial security.
Kevin Mountford, head of banking at moneysupermarket.com, says: 'This marriage of HBOS and Lloyds TSB will lose us valuable choice and competition on the High Street and consumers will be the poorer for it.'
Banks in crisis
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Lloyds TSB is 'just an also-ran' on savings
Like hundreds of thousands of Financial Mail readers, Bill Jones from Tiverton in Devon scours our best-buy tables and has zero tolerance for banks and building societies that fail to offer good deals or - worse still - advertise good rates only to cut them later.
Bill, 72, a retired insurance agent turned farmer, has featured in these pages before to give brutal verdicts on savings accounts that don't make the grade. To date, he's been a fan of Halifax.
'I haven't been alarmed by recent events,' he says. 'In fact, on Tuesday, even while Halifax's shares were falling, my wife and I each transferred £1,000 into our respective Halifax reserve accounts.'
He and his wife Pamela use the Guaranteed Reserve account - paying 5.75 per cent on sums of more than £500 deposited for six months or longer - to build up larger pots of savings, which they then move into top-paying offers from other organisations.
These have included Chelsea, Skipton and Nationwide building societies and Anglo Irish Bank in the past.
Does he think the Lloyds TSB/ HBoS merger is a good idea? 'No. I've never found that Lloyds TSB has ever offered any rate that's any good,' he says.
Bill Jones, who saves with Halifax, fears that rates will drop.
'Lloyds is in the also-ran space.' Of other bank and building society mergers sweeping the sector, Bill, who can recite top account rates virtually verbatim, is also sceptical.
'I voted against the merger of Nationwide and Portman building societies because I feared good rates would go - and they did,' he says.
'I want there to be fierce competition. For too long, savers have had to put up with poor rates. Hopefully, after all this bother we'll be treated better.'
Bill sticks to saving £35,000 at most with any organisation - the limit at which deposits are protected under the Financial Services Compensation Scheme.
'The Government won't let anything go bust, it seems,' he says. 'But one might as well play it safe.'
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