HBOS Launches High-Interest Current Account

HBOS, the group that owns Halifax and Bank of Scotland, today launched a current account paying 5% interest in a bid to entice customers away from the "big four" banks.

HBOS, the UK's biggest mortgage provider, has targeted a 15-20 percent share of the current account market, after lifting its share to 12 percent from 4 percent in 1998.

"This will help shift us further in that direction. I hope it's an important stepping stone (to 15-20 percent)," said Benny Higgins, who started as HBOS's UK retail head in May.

The new account will pay 5 percent interest on balances of up to £2,500, which compares to a typical rate of 0.1 percent on most current accounts, although there are conditional offers at higher rates.

HBOS will offer two other current account products, but according to Higgins, the new high-interest offer will be its mainstream account and should create a stir in the market.

HBOS has adopted a more aggressive approach in retail banking in recent years, taking on traditional rivals Barclays, Lloyds TSB, HSBC and Royal Bank of Scotland with its marketing.

Internet-based banks have also made their presence felt in the savings accounts market by offering high interest rates, due to having fewer overheads. Since it’s laucng in the UK three years ago, ING Direct has attracted over 1 million customers.

Andy Hornby, who becomes HBOS chief executive at the end of July, said in January he wants the bank to gain a 15-20 percent share of core markets such as investment, saving, credit cards and current accounts. HBOS currently has about a 12 percent share of investment products and 11 percent in credit cards.

Currently, Alliance & Leicester, Abbey, Nationwide, and Lloyds TSB all offer interest rates of at least four per cent to their current account customers - and now the Bank of Scotland has joined them.

"Customers are voting with their feet and leaving the big four. This account provides another big incentive to do just that," said Benny Higgins, chief executive of Halifax-Bank of Scotland (HBOS) Retail.

Since launching its high-interest current account in 2001, HBOS has seen its share of the current account market rise from seven to 12 per cent.

Abbey’s head of banking Reza Attar-Zadeh said: "Abbey’s banking report has again shown this year that 42 per cent of people are not happy with their current account because of poor interest rates.

"It really is time for people to vote with their feet and switch to a better deal.”

Alisdair Milton
27th June 2006