Personal Finance: Egg soldiers on to Net

Prudential's new banking services are designed to be Internet- friendly for the 21st century

PRUDENTIAL THIS week launched a new banking and insurance arm called Egg, which is aimed at capturing a larger slice of the younger, technologically-adept market it believes will form the majority of financial consumers in the next millennium.

Egg will initially be launching three products - an instant access savings account, mortgages and personal loans, all of them offering highly competitive rates. The company eventually plans to broaden its range, offering insurance, investments and retirement products.

Mike Harris, chief executive of Egg, says: "Egg is designed for the Internet generation. This is significant, as research has indicated that, by the year 2013, two out of every three financial products will be sold by electronic means. By establishing the foundations now, Egg intends to become the leader and key beneficiary of this financial services revolution."

To attract this new client base, Egg is offering a market-leading instant access account paying 8 per cent gross each year, or 7.72 per cent if interest is paid monthly.

This includes a 0.5 per cent bonus, guaranteed until January 2000, whereupon rates will automatically fall by that percentage, irrespective of what happens to base rates. The same rate is payable on savings between pounds 1 and pounds 250,000, with Egg guaranteeing that, until January 2001, rates paid on its access account will not be lower - excluding bonus - than Bank of England base rates.

For customers who want immediate access to their money, Egg is offering a cashcard option, using Midland Bank and Royal Bank of Scotland machines, with annual interest rates of 7.5 per cent. The first six cashcard withdrawals of up to pounds 500 at a time will be free, but any made thereafter will cost pounds 1 each.

Mortgage borrowers will be able to choose a variety of mortgages, including a variable rate of 7.99 at present, plus a choice of three- and five- year fixed rate mortgages. The five-year fixes offer a choice between 6.45 per cent for a five-year fix, if borrowers are prepared to accept a sliding scale of redemption penalties, to 7.25 per cent if they are not. The three-year deals are similar: 6.79 per cent if one accepts sliding mortgage redemption penalties, 7.25 per cent if not.

Egg is also offering an innovative, cashback-style mortgage. This works by paying a 0.5 per cent cash bonus to borrowers for every year that a customer agrees to keep the loan going. If borrowers decide to repay the loan early, they have to repay the cashback they were first given, minus 0.5 per cent for every year it has been kept.

All of Egg's mortgages will calculate the interest owed on a daily basis, instead of annually, which means that the money they pay into their mortgage account goes instantly towards repaying the loan.

Finally, Egg is offering a new-style personal loan, whereby customers can choose how much they want to repay each month, or the term they will repay it in. Rates will range between 15.7 per cent APR on loans up to pounds 1,000, falling to 10.9 per cent APR on borrowings between pounds 10,000 and pounds 15,000.

Unlike traditional personal loans, customers can reduce or fully pay the loan by making additional repayments at any time they like, without penalty. Or they can even take a break from repayments of up to three months each. The interest is proportional to the outstanding balance.

All three services are available 24 hours a day, seven days a week. Customers will be allocated a named "contact" who will deal with their requests.

Call 08450 399399, or see the Egg website on www.egg.com