Here’s what you need to know about getting a mortgage from digital-only banks — plus how to claim your free fiver
WE are used to doing almost everything online these days – from the weekly shop and booking summer holidays to managing our finances.
But would you trust your money to a digital-only bank?
Or how about getting a mortgage from one? You might not know the names but the likes of Atom, Starling and Monzo have been pushing hard in recent years to challenge the high street giants.
Here is what you need to know:
1. What is a digital bank? Like all the big names in banking, the digital lenders offer services such as current accounts and savings accounts.
But instead of having a branch to pop into, you deal with them either through a website or an app on your phone. Some apps will let you track your spending so you can keep an eye on your monthly budget.
2. What are their rates like? As they don’t have some of the overheads traditional banks do — and because they are trying to attract new business all the time — app-only banks have been able to offer some great savings rates to tempt new customers.
Atom recently increased the rate of its one-year savings account to 1.95 per cent — the highest rate on the market — while its two-year saver pays a rate of 2.1 per cent, also a leading rate.
3. What about mortgages? Atom, which is arguably the best-known of the app-banks, is the only one to offer mortgages at present.
Last year it offered the UK’s lowest-ever deal at 1.29 per cent over five years. But it had to pull the offer after just nine days due to high demand.
Starling and Revolut are also looking to launch mortgages, so the market could soon be even more competitive.
Of course, you will still have to pass all the checks a traditional bank carries out before you get a mortgage approved.
4. Are they safe to use? Check whether your chosen bank is regulated by the Financial Conduct Authority and whether it comes under the protection of the Financial Services Compensation Scheme.
The latter protects savings up to £85,000 if your bank goes bust.
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