The week in savings - w/c 23rd August
31/08/2021
Monday 23rd August
Hodge opened the week with two new best buys as they increased some of their fixed rate bonds pricing. Their 2 Year at 1.50% took them 3bps clear of Tandem and Zopa and their 3 Year at 1.60% edged them ahead of Zopa at 1.57%. Hodge weren’t going to have long at the top though.
Masthaven’s results to 30th April 2021 were published showing deposits and customer numbers drop from £788.1m and 19,228 savers in 2020 to £772.7m and 18,452 savers. The figures also revealed an operating loss before tax of £2.5m – although this was an improvement on the £5.4m loss in 2020
DF Capital overhauled Hodge at the top of 2 and 3 Year (1.55% and 1.65% respectively), just three and a half hours later and they were quickly joined by PCF Bank as joint top of 3 Year at 1.65%.
Recognise Bank announced an additional capital raise of £14m as it progresses towards full authorisation. Recognise became a bank in November 2020 but are authorised with restrictions currently. The capital raise should see them exit the mobilisation phase in the next few weeks with CEO Jason Oakley hopeful of launching savings products in October.
Smartsave Bank increase their fixed rate savings pricing late in the afternoon to go top of market across 1, 2 and 3 Year Fixed - 1 Year - 1.36%, 2 Year - 1.56% and3 Year - 1.66%
Oxbury Bank increased the rates on their notice accounts to move up to joint 2nd in the notice best buys with new rates of 0.90% - 90 Day, 0.79% - 65 Day and 0.65% - 35 Day. They also increase their 3 Year Fixed to 1.59% to move into 5th place in that category
Zopa made the last move of the day increasing all their fixed rates:
- 1 Year to 1.34% to move up to 4th
- 2 Year to 1.57% AER – new best buy
- 3 Year to 1.67% AER – new best buy
- 4 Year to 1.67% AER – new best buy
- 5 Year to 1.7% AER – joint 4th
Having started the day top of 2 and 3 Year Fixed, Hodge finished it 4th and 5th respectively.
Tuesday 24th August
Wesleyan kicked the day off by increasing their fixed rate savings to take best buy spot in 2, 3, 4 and 5 Year Fixed:
- 2 Year - 1.65%
- 3 Year - 1.75%
- 4 Year - 1.77%
- 5 Year - 1.80%
Atom Bank launched a new 1 Year Fixed at 1.22% (joint 8th) and Hampshire Trust Bank withdraw their easy access account paying 0.60% from sale, which was the best paying easy access rate for those who don’t bank on mobile apps.
NS&I Q1 results (April to June 2021) announced showing that they had seen gross inflows of £12.2bn and outflows of £13bn, with Capitalised and Accrued Interest plus prizes accounting for the difference in net financing of -£0.2bn. Given Premium Bonds net inflows during the period were just over £4.5bn, it looks like circa £5.3bn has flowed out of other products. This suggests some delayed reaction by savers to the rate cuts which came into effect in November 2020.
The good news was that, with a target for the year of £6bn net financing, and a range of £3bn - £9bn, this rules out any chance of a cut to the Premium Bonds prize pool. Although Premium Bonds growth is trending way over net financing targets, it's being more than offset by other outflows. In fact, if these trends continue into future quarters, we may even see rate increases from NS&I later in the year to get it on track to hit its annual net financing targets.
In the afternoon, Allica went top of 1 and 2 Year, paying 1.38% and 1.66% respectively, but were quickly jointed by Tandem on 1 Year. Tandem also moved up to joint 3rd on 2 Year (1.57%) and joint 2nd on 3 Year (1.67%)
Wednesday 25th August
Bank North became the 34th new bank to get authorisation (with restrictions) since 2010 as it announced it had received funding from the likes of Channel 4 Ventures and most interestingly, Skipton Building Society.
United Trust Bank increased their fixed rate savings to increase the competition:
- 1 Year - 1.30% (6th)
- 2 Year - 1.55% (joint 5th)
- 3 Year - 1.65% (joint 5th)
- 4 Year - 1.70% (2nd)
- 5 Year - 1.75% (2nd)
They also increased their fixed ISA pricing with 3 Year up to 1.20% (2nd) and a new best buy on 5 Year of 1.45%
Smartsave responded to Allica’s move the day before by increasing its 1 Year Fixed to 1.39% to retake top spot.
However, the afternoon saw Zopa take a clean sweep at the top of the tables with five new best buys:
- 1 Year - 1.40%
- 2 Year - 1.67%
- 3 Year - 1.76%
- 4 Year - 1.78%
- 5 Year - 1.81%
Not to be out done, Smartsave responded straight away with an increased 1 Year Fixed rate of 1.41% to regain top spot.
Thursday 26th August
Leeds Building Society kicked the day off with the first changes, increasing their easy access savings rate to 0.55% to go joint 3rd in the market. They also improved their ISA pricing:
- 1 Year ISA - 0.65% (joint 7th)
- 2 Year ISA - 0.90% (joint 7th)
- 3 Year ISA - 1.05% (5th)
- 5 Year ISA - 1.25% (joint 4th)
Leeds wasn’t the only building society on the move with Furness also increasing their 5 Year Fixed ISA to 1.25% to move into joint 4th spot.
However, Thursday proved to be a quiet day with little other movement but all eyes on Friday and whether this was the calm before the storm.
Friday 27th August
Friday was a day of two halves. It started well with early moves from Aldermore who increased rates on some of their ISA range:
- 1 Year Fixed - 0.80% (joint best buy)
- 2 Year Fixed - 1.00% (joint 2nd)
- 3 Year Fixed - 1.05% (joint 6th)
Paragon Bank joined them at the top of 1 Year Fixed ISA with an improved rate of 0.80% and United Bank Ltd (UBL) reclaimed the top spot on 5 Year Fixed ISA with a new rate of 1.46%.
Gatehouse Bank launched new 18 Month and 4 Year Fixed products at 1.25% and 1.55% respectively, their first time in these categories, taking joint 4th and joint 5th spots in those markets.
The afternoon bought two rate cuts, the first for some time! Allica Bank reduced their 1 Year to 1.36% and 2 Year to 1.64%, on the day their annual results for 2020 were published showing that their savings book had grown to £102m.
Smartsave also followed suit with their best buy 1.41% chopped, ahead of the Bank Holiday weekend, to 1.34% to move Zopa back to the top of the market.
Summary
Rates have increased sharply in August and the moves on Friday pm, by two of the leading protagonists, suggests the froth is coming out of the market. While I don’t expect to see wholesale cuts in fixed rate bond pricing, I do think we will see a slight decline in rates and some normality return.
Wesleyan has too small a balance sheet to maintain its lofty positions and I don’t think it will be long before their rates are withdrawn from sale. However, there’s enough interest elsewhere to keep the market interesting and it’s still possible we may see the odd breakout from where rates are. I do think we will see pricing cool on fixed rate bonds but I won’t be surprised if rates continue to edge upwards on fixed ISAs, as there’s been a definite shift from more established challenger banks to these.