Monzo's aggregate effect on mortgage rates

The handful of large incumbent banks currently act as a one-stop-shop, providing your current account, mortgage, other loans, credit card, etc. etc. Monzo’s marketplace hopes to disrupt this cartel, having niche players hyper-focussed on distinct areas, providing excellent products and service. So, in that context, let’s think about the mortgage market.

As of course you all know, when a mortgage is issued money is created from thin air. The bank then later funds that mortgage either via demand deposits, or via the wholesale markets. They prefer the former because it’s much cheaper. But, assuming Monzo’s marketplace is successful and we end up with a “hub-and-spoke” model of lots of smaller players, how will that affect mortgage finance? If suddenly the mortgage bank has to go to the wholesale markets be default because all their demand deposits went to Monzo, and onwards to various other savings-type providers, then will this push up the cost of mortgage credit?


I’m hoping this and open banking will lead to more innovation (new product) and efficiency (credit risk, underwriting, etc).

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