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Market Watch: Atom Bank breaks the mould

Atom Bank has done something wonderfully different with its concept of price disruption; exciting times are ahead

Some interesting stats have shown that inflation is here to stay for a while, still stuck at 2.3 per cent and expected to keep increasing. With the pound’s fall making imports to the UK more expensive, these higher costs are now being passed on to shoppers.

The issue for consumers is that wage growth shows no signs of movement, so the cost of living is starting to increase, which could hold back consumer spending and economic growth as a whole.

Meanwhile, house prices rose at their lowest rate since May 2013, according to Halifax, up 3.8 per cent year-on-year and only by 0.1 per cent in the past three months. According to the ONS, prices in London fell by 0.9 per cent between January and February.

There has also been some excellent commentary from Ami in its latest Economic Bulletin. Among the points raised were that everyone must allow the changes to buy-to-let underwriting and tax treatment to bed in before making any further alterations, and that “embellished price comparison sites” masquerading as robo-advice should not be allowed to access different compliance standards.

Also, importantly, any discussion around banning or restricting proc fees needs to be deeply considered. Apart from the fact I don’t believe there is any widespread bias, you only have to look at the RDR to see how badly this would work in practice. Vulnerable customers in need of advice may no longer afford proper professional advice and consumer detriment would be widespread.

It was also interesting to see a ruling that could affect mortgage prisoners. A customer who was not allowed to switch to a new rate by Lloyds Banking Group and had to stay on the SVR owing to “an inappropriate plan to repay the interest-only loan” has won their case with the ombudsman.

In the markets, three-month Libor is still at 0.34 per cent while swap rates have tumbled again.

2-year money is down 0.03% at 0.56%
3-year money is down 0.04% at 0.63%
5-year money is down 0.04% at 0.77%
10-year money is down 0.03% at 1.12%


In the mortgage market, talk of disruption has taken many forms, with digital banks, so-called digital brokers and the like threatening to change the world. Atom Bank, however, has done something wonderfully different with its concept of price disruption, offering five-year fixes at two-year fixed prices, which really turns the mortgage market on its head.

A five-year fix available from just 1.29 per cent at 60 per cent LTV and from 1.99 per cent up to 90 per cent LTV shows that product price disruption could be a game changer, enabling consumers to really benefit from this new breed of lender and pointing to exciting times ahead.

Also, proving that innovation is not quite dead, Family Building Society has brought out its Offset BTL mortgage – something that there should be more of. The rate is at 2.99 per cent for two years and it will be interesting to see how popular with landlords products of this ilk prove.

Accord has launched a new-build proposition with some decent products. It will lend 90 per cent LTV on houses and 85 per cent LTV on flats, with offers reissued after six months for a further six months with basic rechecking of the case. It also has a dedicated new-build desk. Products are available from 2.33 per cent fixed for two years to 90 per cent LTV with a £995 fee.

Accord has also made a policy change and no longer requires a two-year UK address history for residential applicants as long as they can verify their current address. In a hat-trick of changes, it will also accept consumer BTL.

Sainsbury’s Bank is back in the mortgage market offering products through L&G Mortgage Club. Rates start from 1.34 per cent and there is a shopper reward scheme for money off the annual groceries.

Santander has a new approach for customers seeking a BTL remortgage without capital raising. They will be able to use a minimum of 125 per cent rental cover at a 5 per cent affordability rate up to 75 per cent LTV. This should help avoid a growing legion of BTL mortgage prisoners.


Andrew Montlake is director at Coreco



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