ING sparks savings price war with Net bank

A fresh savings price war is set to break out today with the UK launch of ING Direct, a Dutch-owned telephone and internet business, which claims to be the world's leading direct savings bank.

A fresh savings price war is set to break out today with the UK launch of ING Direct, a Dutch-owned telephone and internet business, which claims to be the world's leading direct savings bank.

It is basing its offer on a savings rate of 4.3 per cent, with no fees, no penalties and no minimum balance. The nearest domestic rivals are Halifax Bank and Northern Rock at 4 per cent, both of which are internet-only.

Similar online launches, notably from Tesco and the Prudential's egg, have started with a headline-grabbing rate to build up a rapid following, only to fall back into the pack after a few months.

But Lindsay Sinclair, the chief executive of ING Direct UK, insisted that its 4.3 per cent would be maintained. He said: "The UK banking industry needs shaking up. Customers need to be able to unlock the complex and confusing savings market. Our great savings rate, delivered simply and securely, will remain at the forefront of the industry – this is not an introductory rate. We have low overheads and no branches and this saves us money; we pass those savings directly to our customers in the form of high interest rates."

He denied that ING would be paying for the high savings rate by charging high prices for consumer loans. "We will be investing in top quality government bonds," he said, "and we are not looking for a very high margin. We are relying on low costs and high volumes, and in the US we broke even with this model in less than three years."

Costs are being kept low by the fact that ING will have only one product, the savings account, in the UK for the first year. The operation is based in Reading and is expected to create 200 jobs this year. For details phone 0800 376 5050 or visit www.ingdirect.co.uk.