Banks, Building Societies and other lenders have had a pretty miserable time over the past twelve months, with the effects of the credit crunch severely impacting on their business and their ability, or willingness to grant loans and mortgages to individuals. Many organisations have been forced to downsize their operations, making a large number of redundancies and some lenders, mostly in specialist areas such as sub-prime bad credit loans, have stopped trading altogether.

Lenders are now attempting to recoup their losses and start to turn a profit again by tying customers into other financial products with them, such as current or savings accounts as well as building and contents insurance, life insurance and income protection policies.

This has multiple benefits for the lender, firstly by cross selling additional products, they can derive profit from other areas of business, allowing them to offer more competitively priced mortgage and homeowner loan deals, thereby attracting more new customers and secondly, by providing as many financial products as possible for each borrower, they effectively close out the competition from other providers and are therefore likely to retain their customers for longer.

The Co Operative bank is the latest lender to launch a range of mortgage products where the customer must open a current account alongside their loan in order to benefit from an attractive rate. The Royal Bank of Scotland have a similar scheme, whereby the borrowers salary must be paid into a current account with the bank. This is a particularly clever move by the banks as it allows them access to a vast amount of financial information about its customers, allowing them to target market individuals for additional financial products such as personal loans and savings plans.

Another area which is growing in popularity is offset mortgages, whereby a borrower is able to offset any savings they may have against the balance of their homeowner loan, thereby reducing the overall cost of their mortgage.

A word of warning though, don’t be lured into the clutches of the bank too easily. It is still worth shopping around for the best deal on things like buildings and life insurance, as well as personal loans and credit cards. You could save yourself even more money.