Major restructure at Lloyds – what does it all mean for you?

When Lloyds TSB merged with HBOS earlier this year to form Lloyds Banking Group, major changes within the new super bank were inevitable and we are starting to learn a little more about how the company is looking to position itself going forward. But what will it all mean for customers?

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There’s a huge array of sub-brands under the Lloyds Banking Group umbrella which have been accumulated over the years following a number of mergers and acquisitions. Lloyds TSB itself was the result of the merger between Lloyds and TSB banks, while HBOS was formed following the merger of Halifax and Bank of Scotland. But other brands within the stable include Cheltenham & Gloucester (C&G), Scottish Widows, Birmingham Midshires, Intelligent Finance (IF), Clerical Medical and Blackhorse Loan. And the group also provides savings accounts for Saga, the AA and Sainsbury’s Bank.

So what’s changing?

C&G

The announcement to have made the most headlines is the decision to close all 164 C&G branches in November, which will result in the loss of 833 jobs. C&G’s branch network stems back to the days when it was a building society.

However, the closure of this branch network does not mean the demise of the C&G brand so for customers it will be business as usual. If you are an existing customer, you will continue on the terms of your current mortgage or savings deal. Lloyds Banking Group will also offer products for new customers under the C&G brand.

Since the merger with Lloyds TSB, C&G has been used by Lloyds for its intermediary mortgage products – mortgage deals available through brokers. Mortgages applied for directly in branches and over the phone have been Lloyds TSB branded. This strategy of using C&G as the intermediary mortgage brand will continue so mortgages bought via a broker will be C&G loans.

C&G savings products are also still available and this will continue. Anyone who currently uses a C&G branch to manage their savings or mortgage accounts will be able to do so via any Lloyds TSB branch.

IF

IF is a smaller brand than C&G but the changes announced are no less significant than those to C&G. In fact, in many ways they are more noteworthy because they represent a major shift in the way IF has been positioned in the marketplace.

IF was arguably one of HBOS’ most innovative brands, centred around its offset mortgage proposition. An offset mortgage enables you to set your savings against your borrowings to reduce the amount of interest you pay on your mortgage. Say you have a £100,000 mortgage and £25,000 in savings, rather than earning interest on your savings, you will only be charged interest on £75,000 of your mortgage. This enables you to clear your debt more quickly.

However, from July 1 IF will stop offering mortgages. This will not affect existing customers for the time being, although it will mean that they are unable to remortgage onto another IF loan, once their current mortgage deal ends. They will then have to decide whether to pay IF’s standard variable rate, or switch to another provider. If they’ve been making full use of the offset facility, this will also mean moving savings accounts, and possibly current accounts, making the transfer process more complex than a standard remortgage. This doesn’t mean customers should be put off from doing it – if you can get a better deal by moving elsewhere then a bit of extra hassle could be well worth enduring.

It’s not RIP for the IF name however. While it will not be used for mortgages going forward, Lloyds is going to re-focus the brand on savings accounts. A spokeswoman for Lloyds said IF will be used to drive savings business going forward, with products being available online or over the phone.

Kevin Mountford head of banking at moneysupermarket.com said: “This is a really interesting move as IF has not been a major player in the savings arena – let’s hope this adds more competition to the savings market.”

Lloyds will continue offering offset mortgages, although these will be marketed under the Scottish Widows brand going forward.

Bank of Scotland

As part of the re-organisation, Bank of Scotland mortgages will no longer be available via brokers – borrowers will only be able to apply for them direct. This decision is also significant.

Certainly before the onset of the credit crunch many mortgage brokers used Bank of Scotland frequently, particularly for clients who needed large mortgages or who had untypical employment circumstances. For example, it was good for those who had a number of income streams, or whose annual income comprised of a large bonus.

Obviously, things have changed because of the credit crunch and recession as lenders have become much more cautious, but Bank of Scotland’s departure from the intermediary mortgage market could restrict options available for borrowers further down the line.

Any existing Bank of Scotland Mortgage customers will continue on their current mortgage terms, and mortgages, along with other Bank of Scotland, branded products will continue to be available via branches.

Impact for customers

As far as existing customers of any of the Lloyds brands are concerned things will continue, pretty much as normal for the time being. The terms and conditions on your accounts should remain unchanged, and they remain under the branding of your existing provider.

However, there will be implications on deals for new customers – in some instances we may see more competitive rates launched, but in other areas rates may become less attractive. And although no brands have been totally disbanded in this re-structure we could well see brands disappear further down the line.

Therefore consumers should not be loyal to a brand. Regardless of whether it’s a mortgage, savings account or any other financial product, make sure you compare deals from across the market and identify the most suitable one for you.

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