September Savings Roundup

Has the Bank of England Base Rate increase been good for savers?

Last month, we went to print just before the Bank of England met to decide whether to raise the base rate for only the second time in a decade. We had a hunch that they might not, although the market was pricing in a rise, given that we’d been in similar positions in previous months. We got that bit wrong, but we’ve (very sadly) been right in our predictions of what it means for savers.

We said ‘the larger banks and building societies still have more savings deposits than they need and we think they are likely to pass on little or none of the benefit of any base rate increase to their savers, instead using it as an opportunity to improve their profits.’ We predicted that ‘savers hoping for a base rate increase to improve their returns are therefore likely to be disappointed’.

Lloyds Bank has only increased rates on two accounts, Barclays has increased its Everyday Saver by just 0.05% and HSBC, Natwest and Santander have passed on only 0.10% to customers of their Flexible Saver, Instant Saver and Everyday Saver respectively.

Even government backed National Savings & Investments (NS&I) hasn’t been able to pass on the full increase. NS&I have announced that they will increase some rates from 1st October but these range from just 0.05% to 0.15%.

Building societies, who are run for their members benefit, rather than to maximise profits, have been just as bad as the big banks. 29 out of 45 have still to announce any changes. Only 32 financial institutions have changed their savings rates and only three have passed on the full 0.25% rate – Beverley, Holmesdale and Swansea Building Societies.

At the top of our best buy tables, we have seen a host of new names takeover top spots in the past month with only one category (5 Year) remaining unchanged since the start of August. While the providers have changed, the rates haven’t moved significantly. The best increase has been 0.09% on notice accounts with 0.06% (2 Year) and 0.05% rises on 3 Year and instant savings. Otherwise, our tables are largely unchanged.

When will we see more new banks come to market?

 

The list of prospective new banks seems to grow by the day - we’ve heard from another two new firms since our last column – and we believe there are now over 40 firms at some stage of the process.

We have been asked a lot this year as to why we haven’t seen many of these come to market yet. The simple answer is that the average time to go from the initial meeting with the regulator to being authorised and live in the savings market is 27 months. We anticipate that 2019 and 2020 will see many of these prospective banks come to fruition with 2020 likely to be the high point before numbers drop back.

That being said, we are expecting to see some activity this year with Orchard Funding Group announcing last month that it is hopeful of receiving its banking licence by the end of 2018. Marcus, a new arm of Goldman Sachs, which is already live in the US with savings accounts has announced it is open in the UK to employees and expects to be live nationwide in the coming months. With an initial interest rate on its savings account of 1.50%, it is likely to be very popular if that is the rate it launches with given the best buy is currently 1.36% from Virgin Money.

Zopa, the peer to peer lender has announced it has secured £44m to fund its expansion in to banking and is now almost two years on from its original announcement that it was seeking to gain authorisation.

Civilised Bank, who had to surrender their licence in April this year, have hired a wave of new bankers, including former Harrods Bank CEO, Mark Stephens, for what looks like another assault on the market.

While we don’t expect every prospective bank will come to fruition, we believe that a significant proportion of those firms looking at a banking licence will make it to market.

What are the best rates currently?

The market can move quickly, so we always recommend that you check our website for the latest rates. At time of going to print, our best paying personal savings rates are:

 

Term

 

 

Interest Rate

 

Provider

Instant Savings

1.36%

Virgin Money

Notice

1.85%

PCF Bank

1 Year

2.05%

Bank of London & Middle East

18 Months

2.11%

Charter Savings Bank

2 Year

2.26%

Secure Trust Bank

3 Year

2.40%

Tandem Bank

4 Year

2.52%

Vanquis Bank

5 Year

2.70%

Bank of London & Middle East

About The Savings Guru

We help savers get the best deal for their money by providing unique insight in to the savings market.  We help prospective banks apply for a banking licence and we help build customer services, products and marketing for them.  We also work with existing banks and building societies to improve their savings propositions.  This  insider view of savings means we are uniquely placed to help savers.

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