Oz accounts can be wizard

Australian-style bank accounts which mix your salary, mortgage, savings and credit card into an all-in-one account to minimise interest payments are set to take off in the UK with banks lining up to launch new products over the next few weeks.

The idea behind all-in-one accounts is that a mortgage effectively becomes a current account. For example, someone with a £60,000 mortgage pays their £1,500 salary cheque into the account, which immediately reduces the mortgage balance to £58,500 and therefore cuts the interest owed. But the bank continues to allow the homeowner to pay their usual bills and expenses out of the account as if it were their current account, as long as the customer does not exceed certain limits.

Savings accounts are also put against the mortgage, so instead of earning at best 3%-4% interest after tax, the person saves 7.75% on loan interest payments. But the savings are not "lost" to the mortgage; customers are still free to withdraw the money at any time.

Yorkshire Bank, which today launches an all-in-one account called Rapid Repay, believes that the typical UK homeowner will save £16,449 by switching to the new-style accounts, and will pay off their mortgage seven years early.

In the land of Skippy the kangaroo (where Yorkshire Bank's parent National Australia Bank is based) all-in-one bank accounts are used by around one in four people, but in the UK they have been slow to take off. Virgin and First Active have offered the accounts for several years but are coy about revealing the number of customers.

But more recently Woolwich's Open Plan account has brought the concept to a wider audience, and in July the new phone and internet bank Intelligent Finance will take the concept further. It hopes to by-pass people's concerns about putting all their eggs in one basket by running a new system which will keep savings and mortgage accounts separate, but "sweep" the accounts every night to minimise the total interest paid.

One drawback to the accounts is that the mortgage rate charged is rarely competitive, even if the total amount of interest paid is reduced. For example, Yorkshire Bank will be charging a 7.74% rate on its Rapid Repay loan - the same as the Halifax standard rate but much higher than many of the sub-5.5% discount mortgage deals currently available on the market. If you are a mortgage holder who switches regularly to gain the best deal, the all-in-one accounts will hold few attractions.

However, some of the all-in-one accounts do offer discounts; First Active cuts its standard 7.74% rate to 4.49% for the first six months. It also has a base rate tracker which will keep the rate at no more than 1.25% above base rate (currently 6%) for the lifetime of the loan. Another drawback to the accounts is that because they require your entire monthly salary cheque to be paid in, it means closing your previous bank account and switching to the new one. That also spells the inevitable hassle and delays of switching direct debits and standing orders to the new bank.

To counter the hassle factor and force banks not to drag their heels on transferring accounts, Intelligent Finance this week promised that it will name and shame those which take the longest to enact a transfer. IF chief executive Jim Spowart says: "We promise to expose any bank that appears to be obstructing the process of customers switching their current account by publishing the time it takes for customers to move from each bank."

It is employing 400 people dedicated to helping people transfer their accounts, and will pay a £10 bonus to cover the cost of interest and inconvenience during the changeover. It says the process should be speeded up by CATS, the new current account transfer scheme being piloted by a number of banks.

But what if the worst heel-dragger turns out to be Halifax, the parent company of IF? Mr Spowart promises to name and shame them too. Watch this space.