Is this the end of area postcodes?

Postcode tyranny could soon be a thing of the past. The ubiquitous combinations of letter and numbers, which have increasingly pervaded our lives since they were introduced 43 years ago, could soon be attached to us as individuals rather than to our addresses.

A short history of the postcode

Postcode tyranny could soon be a thing of the past. The ubiquitous combinations of letter and numbers, which have increasingly pervaded our lives since they were introduced 43 years ago, could soon be attached to us as individuals rather than to our addresses.

This would present a headache for NatWest and Alliance & Leicester, two banks who said this week that they were demanding higher house deposits from people buying in certain postcodes. It would also throw the junk-mail industry into confusion, because that relies on the present postcode system to decide who should receive their latest mail shots.

Lorna Clarkson, director of innovation at Consignia, who is credited with introducing self-adhesive postage stamps to Britain, has been working on the personal postcode project since last summer, and hopes to be able to go public with it next year.

She said: "It would enable people to have one postcode for their whole life, wherever they moved, and the post would be sent to each person rather than to their address, not unlike a hotmail e-mail address. It is a fact that people move house a lot more than they did previously."

That is what has been bothering NatWest and A&L. They are concerned that the scramble to get on the housing ladder is creating financial hotspots, so they want to cut their exposure by insisting that buyers put up more of their own money.

In these key areas the two banks, which together account for £55bn of Britain's £793bn mortgage market, are demanding deposits of up to a tenth of the house price, instead of a twentieth or, in some case, no deposit.

A&L has cut its maximum loan for properties worth between £100,000 and £250,000 from 95 per cent to 90 per cent in Greater London, Ports-mouth, Southampton, Tunbridge Wells, Chelmsford, Colchester, St Albans and Milton Keynes. NatWest is refusing to lend more than 90 per cent of the price in areas where there had been what it considered to be "disproportionate" increases. It would not say precisely where, because the hotspots were changing "from week to week", but a borrower in Tufnell Park, north London, said she had been told she would have to put down a bigger deposit because of the postcode of the property she wanted to buy.

Halifax, the former building society which lends as much as NatWest and A&L on its own, is concerned that the Government might crack down on lenders who effectively duck out of lending in this way, because of the social impact that might have. Shane O'Riordain, Halifax's spokesman, said: "We are worried where a lender decides to withdraw from a particular line of business on the basis of postcodes.

"The risk for us is not in the locality, it's around the issues of affordability and how likely a borrower will become unemployed. It's really about first-time buyers, because it makes it difficult for them to get started. We think the Government may not react well to this development, because they are keen for lenders to get into the starter-home initiative. This just aggravates the problem."

For NatWest, David Outhwaite said: "It is important to bear in mind that for less than 1 per cent of our mortgage business of 300,000 loans we are asking people to make slightly higher deposits. We can all remember the early Nineties, when 1.2 million houses fell into negative equity, and we want to prevent that happening again, for our borrowers' sake as well as for us. It's a precautionary move; it's not black-marking or red-lining."

These are practices which are not illegal but are heavily frowned upon by the marketing industry. The head of one of Britain's credit-rating agencies said: "Individual postcode addresses should not be used in this way, to decide whether someone should get a loan or a credit card. But postcodes can be used in targeting offers of credit. It would plainly not be appropriate to offer gold cards in areas which are student-dominated, for example."

Postcodes are used to decide where your nearest supermarket or petrol station is going to be built. This is because they are central to the obscure but highly sophisticated science of geodemographics, the study of the effects of spatial location on marketing and retail. This involves the spatial distribution of customers, potential customers and retail/marketing outlets and typically focuses on three areas, customer-profiling through customers' use of in-store cards, branch location analysis and direct marketing.

Postcodes have long been used in deciding house and car insurance rates, and have made areas such as Toxteth in Liverpool almost uninsurable. But they cause most controversy in deciding credit.

A marketing executive said: "Postcodes are one characteristic in a series of characteristics which decide whether someone should get credit, along with income, a person's record of bill-paying and how long they have lived at an address. In that context, using the postcode is OK, if it is just one element on a scorecard."

Now the geodemographics boffins and their counterparts in the banking industry are going to have to come up with another yardstick to turn our lifestyles into a line of data on a computer read-out.