Speaking of combined accounts (see Higher One), why isn't anyone in the United States offering a combined mortgage/deposit account, a product that's been quite popular in the UK ever since Virgin pioneered the concept in 1997.
The OneAccount, now wholly owned by The Royal Bank of Scotland, has grown to 160,000 accounts with US$20 billion in loan commitments ($125,000 per account).
Analysis
While a combined mortgage/deposit account probably won't appeal initially to mainstream consumers, it's a potential PR and marketing gold mine. Using deposit totals to offset mortgage principal balance creates significant savings when compounded 30 years.
For example, a $1000 average "deposit" balance used instead to offset the mortgage balance, returns 5-to-1 in interest savings over the life of the loan (using 6% rate), e.g., a $5000 savings. The savings are more if interest rates increase.
Deposits used to offset the mortgage balance provide a rate-of-return equal to the mortgage rate. For example, your customers with 6% mortgages, earn 6% by using their deposit totals to offset the mortgage balance.
The Business Case
At first glance, the combined account seems to have a challenging business case. Every dollar used to offset the mortgage balance is one less dollar earning the spread between deposits and loans.
If you already have the majority of your customer's deposits AND loans, forget about this offering. Enjoy your success!
But if you are looking for ways to increase your home-secured lending business, this product has real potential to bring in new outstandings.
-- JB
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