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Proposed merger of Abbey and Alliance & Leicester

The merger of these two high street names will likely briefly bring increased confidence to the industry. However, it will also bring further reduction in consumer choice, which is already under pressure and has seen significant reductions, particularly in the mortgage market.

Mortgages

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Both companies have similar pricing on their mortgage ranges. Alliance & Leicester has historically had more accommodating criteria with a maximum advance of £1m, compared with Abbey's £550K.

Historically, mergers in the mortgage market have worked out as more of a takeover of the mortgage book, with one company's product range features disappearing altogether without bringing together the best of both product ranges.

Savings

Both institutions operate in the same savings markets, choosing to offer instant access/no notice accounts rather than notice accounts along with a selection of fixed rate bonds.

Alliance & Leicester offers a straightforward product range. In comparison, Abbey has launched some headline grabbing products, which can either require savers to make additional investments in other Abbey products or come with restrictions on the number of withdrawals that can be made.

Although the restrictions on the Abbey accounts limits the number of savers who are eligible for its highest rate deals, by tempting savers its way, Abbey is likely to have cross-sold other more suitable savings deals from its range.

Current Accounts

Alliance & Leicester has dominated the current account market for the last few years with its Premier Direct account. The account tops Moneyfacts.co.uk best buys for both credit interest and overdrafts. It has scooped the Moneyfacts award for credit interest for the last three years and debit interest for the last six.

Abbey has recently become more competitive in the current account market, currently taking second place in the credit interest best buys.

Alliance & Leicester's Premier Direct account has really laid down the gauntlet to other institutions, consistently topping best buy tables. If this product disappears, it will be a huge loss to the current account market.

Related links:

• Compare Mortgages
• Compare Savings Accounts
• Compare Bank Accounts