Switch on the double to avoid money trouble

Many first-time buyers think if they get their mortgage from their bank, they will get more favourable terms - a bigger loan - than their income would otherwise entitle them to.

However, the days when being pally with the bank manager could swing you discounts are more or less over, with individual branches obliged to follow institution-wide credit criteria monitored by regulators. Customer loyalty won't get you very far: a good savings history at one bank or building society will impress a rival lender just as much as if you were one of their own. But there are times when it helps to have your current account and mortgage at the same institution.

First Active and National Irish Bank (NIB) both offer combined current accounts and mortgages, where the credit balance in the current account can be offset against the mortgage debt on a daily basis, thus saving on interest payments over the long term. Under NIB's "offset mortgage", customers can credit as many as six NIB current accounts and six NIB savings accounts against the loan.

But for people who don't want to entangle their day-to-day finances with their mortgage debt, there is another way in which keeping your current account and your mortgage at the same institution can save money.

The Moneymate table opposite shows that Ulster Bank offers interest rate discounts to borrowers who have either a U First or U First Gold current account, which cost €9 a month and €14 a month respectively.

On Ulster Bank's Flexible Home Loan - a tracker mortgage where the interest rate varies in correlation with the European Central Bank (ECB) base interest rate - the current rate is 3.15 per cent for borrowing between 60 and 92 per cent of the purchase price of the property. But for U First customers, the rate is 3.05 per cent, the lowest tracker mortgage rate available in the 60-92 per cent loan-to-value (LTV) market.

The difference between 3.15 per cent and 3.05 per cent might not sound like much. But on a €200,000 mortgage being repaid over 30 years, the lower rate will result in savings of €10.86 a month, or €130.32 over a year. This more than cancels out the €108 annual cost of U First, which also offers other discounts and "lifestyle benefits", while saving the homeowner any additional banking fees. The bigger the mortgage, the greater the savings.

Several lenders offer a tracker rate of 3.1 per cent to people borrowing between 60 and 92 per cent of the purchase price. As the difference between paying 3.1 per cent and 3.05 per cent on a €200,000 loan over 30 years is only €65.04 annually, someone who avails of the free banking under Permanent TSB's switch current account, NIB's Freebank or Ulster Bank's standard current account could be better off taking a 3.1 per cent rate and not forking out for U First.

But a rate of 3.1 per cent is only available on loans over €200,000 at Bank of Ireland and ICS, and loans over €250,000 at AIB, Permanent TSB and IIB Homeloans.

For people with mortgages of less than 60 per cent LTV, even lower rates than 3.05 per cent are on offer. This, combined with a new code of practice on switching bank accounts, could convince many established homeowners that now is the time to review their personal finances and attempt a double switch.