Financial experts underwhelmed by a lack of introductory offers and products which can usually be beaten by shopping around
"The British banking revolution begins today," claimed Metro Bank. But many experts were underwhelmed by its first set of products and the lack of introductory offers. "The rates generally aren't going to trouble any best-buy tables," said David Black at financial research firm Defaqto.
Current accounts
Anyone who keeps their account in credit will be disappointed: there is no in-credit interest paid on any of Metro's current accounts. Everyone will also get the same overdraft rate: 15%. This is slightly higher than the market average. Over-50s who sign up get a free safe deposit box for the first year.
When it comes to fees there is a "paid item charge" of £10 which is levied each time a payment, deduction or withdrawal creates or increases an unauthorised overdraft. You can be charged up to six times a month.
Metro will also charge an "unpaid item charge" of £5 for each cheque, direct debit or standing order payment which it refuses because it would have created or increased an unauthorised overdraft. Again, it will charge up to six of these in a month. There is a £10 charge for a stopped cheque and £15 for issuing a banker's cheque.
"Credit interest has pretty much died out on current accounts now," says Andrew Hagger of moneynet.co.uk. "Lloyds has just announced it is dropping its credit interest rate, although Santander has an introductory offer of 5% interest for 12 months."
There is also a packaged current account costing £12.50 a month, which comes with worldwide travel insurance and other benefits. This has an additional incentive which Hagger likes: "Metro will hold a spare set of your car and house keys for you and commit to getting these to you within two hours if you lose yours. It is only useful for Londoners, but nevertheless is a novel idea."
Metro also offers a basic bank account, which you can ask for if you don't want to go overdrawn and just require a limited range of ways of making payments and withdrawals from your account. It also offers a student account.
To open an account you have to go into a branch. "The lack of online account opening facilities will really restrict the growth opportunities for Metro," says Kevin Mountford of moneysupermarket.com.
Mortgages
Metro's mortgages, meanwhile, are only really an attractive option for those who can manage large deposits, according to uSwitch.com.
The bank will lend up to 80% of a property's value, but anyone borrowing more than 60% will find an extra one percentage point added to their rate.
For those wanting a 60% loan-to-value (LTV) there is a two-year variable rate deal at 3.5%, a two-year fixed-rate at 4%, and a three-year fixed-rate at 4.5%. All come with a £500 fee. In all cases there are cheaper deals out there.
David Hollingworth of mortgage brokers London & Country says: "It is good to see a new entrant to the market although the products are, roughly speaking, 1% off the pace.
"They will need to sharpen up their mortgage pricing if they want to compete against established high street players. Although borrowers may be prepared to pay a little more for a good service proposition they are highly unlikely to stretch their price tolerance to such an extent, especially on their largest outgoing."
For anyone wanting a two-year fixed-rate mortgage, Hollingworth points instead to the Skipton building society, which has a 2.99% rate at 60% LTV with no fee. For a three-year fix, Metro's rates can be bettered by Accord Mortgages, which has a rate of 3.64% up to a 75% LTV with a £1,995 fee. For a two-year variable rate mortgage ING charges 2.29% (1.79% above Bank of England base rate for two years) up to 60% LTV with a £945 fee.
Savings
Metro has an instant access savings account paying 0.5% on a minimum balance of £100 with unlimited withdrawals. The average interest rate elsewhere is 0.84%, according to Black, while the best rate on an instant access account comes from the AA at 2.8%, according to moneynet.co.uk.
"To get the best rate on a savings account you now have to look at accounts that pay a bonus for a limited period," Hagger says. "The AA account includes a 2.3% bonus for 12 months, which then reverts to the same rate as the Metro at 0.5%. That is the time to switch accounts again."
Metro also has two young savers accounts, one for children aged 10 and under and the other for those between 11 and 21. Both pay 1% ? the average elsewhere for these sorts of accounts is 1.14%, Black says.
The bank also has two fixed-rate savings bonds paying 2.5% over one year and 3% over three years. The one-year rate can be bettered by Indian bank ICICI, which pays 3.1%, and the Barnsley building society, which has just launched a one-year fixed-rate account at 3%.
Over three years, the rate is easily beaten by ICICI at 4.15% and the AA at 4.1%.
Credit cards and personal loans
Metro's one-size-fits-all rates of 13% and 10% on credit cards and personal loans respectively do look competitive.
Black says a credit card APR of 13% on purchases, balance transfers and cash withdrawals is "well below average". This is the typical rate ? meaning not all customers will get it ? and the minimum monthly payment is 5% of the balance or £20, whichever is the greater.
The personal loan rate of 10% is also a typical rate and is fixed for the life of the loan. Loans are available from one to five years and from £1,000 to £25,000. On a £3,000 loan over three years repayments would work out at £95.42 a month, while £10,000 over five years would work out at £318.07 a month.
"In the wider market, if you borrow larger amounts you will normally get a lower rate," Hagger says. "For example, there are four providers who will lend £5,000 at below 9%." These are Sainsbury's, Tesco, the Post Office and the AA.
"However, on a loan of £1,000 you are looking at interest rates of over 20%, so the Metro Bank rate is excellent for that level of borrowing," Hagger says.
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