Published: 09/10/2020
James writes a monthly savings column for Essex based magazines, Beaulieu & Channels. This is a reproduction of his October column which covers the NS&I rate cuts and what action savers should take.
Published: 19/08/2020
James writes a monthly savings column for Essex based magazines, Beaulieu and Channels. This is a reproduction of his August column.
Interest rates on savings rising
The past month has seen a turnaround in the savings market. Having had three months of falling rates, which saw the best buy 1 Year rate fall from 1.60% in early March to just 1% in early July, we’ve witnessed a mini revival in the past week.
In a two week period, across the end of July and start of August, we’ve seen United Trust Bank increase their 1 Year rate to 0.85%, to 0.90%, then 1% to finally 1.10%, where it was briefly top of market. Similarly, Charter Savings upped their 1 Year to 0.91% before increasing to 1.05%. Secure Trust Bank initially launched a new 1 Year rate of 0.95% before announcing an increase to 1.16% just 24 hours later.
ISA rates also heading north
Rate rises weren’t just confined to 1 Year Fixed rates as we also saw increases in ISA rates with Charter Savings (0.71%) and Kent Reliance (0.70%) taking 1st and 2nd spot in the 1 Year ISA tables. Charter (0.92%) also went top of the 2 Year ISA tables with Secure Trust (0.80%) launching a new product taking second spot. We also saw increases in rates from Kent Reliance (up to 0.75%) and Hampshire Trust (0.70%).
NS&I driving increases
I believe this upward movement in rates is being driven by National Savings & Investments (NS&I), the government backed savings provider. NS&I currently offer the best no notice rates in the market across a number of their products. Their Premium Bonds pay a prize fund interest rate of 1.40%, their Income Bonds pay 1.16% and their Direct Saver 1%. Their Direct ISA pays 0.90%.
NS&I took in almost £20bn (£14.5bn net) of new money in the three months from April to end of June this year. To put this in context, Metro Bank got its banking licence in 2009 and has since grown to look after £15.6bn of savings.
What is happening is that banks who need to raise deposits to fund their lending activities are finding it hard to compete against NS&I and their backing by HM Treasury, which means that all funds invested with them are 100% secure, whereas other banks are reliant on the Financial Services Compensation Scheme (FSCS) which protects savings up to £85,000 per person per bank. This is forcing them to increase rates to attract savers.
Where are interest rates heading?
Much depends on what happens with NS&I. They have a net funding target for the year of £35bn with a range of £32bn - £38bn. They are on course to smash this so they will have to announce a rate reduction soon or HM Treasury will have to increase this target. I think a rate reduction is most likely and, given NS&I needs to give two months’ notice of this, I expect this to come sooner rather than later with September looking likely.
This means that any impact, of an NS&I rate cut, will be delayed. Therefore, I think we will continue to see some price increases from providers in shorter term rates (up to 2 Years). I don’t see a significant breakout from the levels we are currently at, but we may see the odd rate higher than where we are. If so, they are unlikely to last long so I’d recommend any savers interested in them move quickly to secure them.
£160 incentive to switch bank
Banks have long been keen to entice people to switch accounts and we’ve seen some great incentives for people to switch account historically. They all disappeared during lockdown but the first one has reappeared. Halifax Reward account is offering £100 to switch and you can also choose one reward each year, one of which is £5 a month cash. If you’re looking to switch bank account and could do with a financial boost, it’s certainly worth a look.
Published: 08/07/2020
James writes a monthly savings column for Essex based magazines, Beaulieu and Channels. This is his column from their June magazines, which was published late in the month after lockdown restrictions for Covid-19 were eased.
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It’s great to be back writing my column again after the enforced break due to Covid-19. The world has changed so much in the past three months and the savings market has been no different.
Prior to lockdown, it was still possible to get 1.31% on an easy access account, 1.65% on a 1 Year Fixed Rate and 2% on a 5 Year. Now there are only 2 different providers paying 1% or more on easy access, a half a dozen providers paying more than 1% on 1 Year Fixed Rates and only BLME is paying over 1.40% on 5 Year money.
Why are rates falling so sharply?
There are a number of reasons for this. The amount of lending that banks are doing, which your savings are used to fund, has dropped substantially. The property market ground to a complete halt and, while many people have suffered financially due to the lockdown, there are others who have found themselves with more money than before. Many of them have paid off loans and credit card debts, further reducing the amount of money banks are lending.
The government has also opened up a new Term Funding Scheme for Small & Medium Enterprises (TFSME) which, in short, is giving banks a cheap source of funding to help support lending to SMEs.
The volatility of the stock market has led many investors to move money into savings and the Bank of England has reduced its base rate from 0.75% to 0.25% then again to 0.10%. All in all, a recipe for the low savings rates that we are seeing currently.
NS&I top the tables
There have been few rays of sunshine for savers, but one has been the cancellation of planned rate cuts by the government backed National Savings & Investments. A raft of interest rate reductions planned for May were cancelled, much to the relief of its 25 million savers.
NS&I looks after £167bn of savings and is one of the largest savings providers in the UK, alongside the ‘big 4’ banks (Barclays, HSBC, Lloyds and RBS), Nationwide and Santander. While those compatriots have barely been near a best buy table for savings in the past decade, NS&I now finds itself top of some.
Its ‘Income Bonds,’ which start at £500 and don’t require any notice to access, pay a table topping 1.16% and its Direct Saver, which can be opened with just £1, pays a next best 1%. Their easy access ISA (0.90%) is only beaten by Al Rayan and the Premium Bonds prize pool is 1.40%.
As NS&I is government backed, all savings with it are 100% protected and risk free. Also, their terms and conditions require 2 months’ notice to change the rate. While this isn’t a long guarantee, it does give a degree of protection on any potential rate reductions and enough notice to look for other options.
Is there any other good news?
Forecasting the market is tricky but I think we are in for more rate cuts sadly. Based on the current economic and coronavirus outlook, I think we will see further falls but I do feel we are reaching the bottom of the market.
My advice is not to tie up your money longer than a 1 Year Fixed Rate and to take any good rates that may come out for that term as soon as you can as we are seeing products launched and withdrawn in a matter of a few days, and rate changes are a daily occurrence and sometimes it feels like its hourly!
Regular savings pay the best rates
One product that is definitely worth considering, particularly those who have extra monthly income they aren’t used to, is to look at regular savings accounts. HSBC, M&S Bank and first direct all pay 2.75% on their monthly regular savers to existing customers. Halifax, Kent Reliance and West Brom Building Society all pay 2% to existing and new customers. Halifax allows up to £250 per month to be saved and Kent Reliance £500 per month.
That’s all for this month. As always, we love to hear your feedback so please let us know if there’s topics you’d like me to cover in future months.
Published: 01/05/2020
After the high-water point of 2017, the market has been relatively starved of new entrant banks. That’s all about to change with 2020 poised to be a record-breaking year for authorisations and launches. James Blower takes us through the runners and riders.
Published: 21/09/2020
National Savings & Investments (NS&I) today announced a round of interest rate reductions across their product range which have significant ramifications for the savings market.
Published: 21/07/2020
On Thursday 16th July, HM Treasury announced an update on National Savings & Investments (NS&Is) net financing target for 2020/2021, which has significant ramifications for the savings market. The key highlights of this are:
* NS&I now looks after £193.7bn of savings
* NS&I's net financing target for the year to 31st March 2021, increased to £35bn (with a range of £32bn - £38bn).
* £14.5bn net inflows in NS&Is first quarter (April to June 2020) - £19.9bn in, £6bn out (difference is interest/prizes)
NS&I has been in a group we refer to as the savings big 7 - Barclays, HSBC, Lloyds, Nationwide, NS&I, RBS and Santander hold approximately 75% of the savings balances in the market. Like for like comparisons are difficult to do mid year, as banks don't provide the kind of regular updates that NS&I do, it is likely that NS&I has now gone from being at the bottom of that group to being the second largest savings provider in the UK behind Lloyds Banking Group.
The net financing target is the amount of extra savings that NS&I is targeted to bring in by the Treasury. This is a net figure i.e. it is new money put in to NS&I accounts by savers, plus interest paid in to those accounts, minus monies withdrawn, interest paid away and prizes (paid to Premium Bond winners). The target previously had been £6bn so the move to £35bn is a six fold increase. NS&I is already huge but now it's got a mandate to get even bigger!
For much of the past decade, the best interest rates on savings have been paid by the wave of over 50 new entrants who have entered the savings market. Many of these have come from newly awarded banking licences (there has been 28 new licences in this time) but we have also seen takeovers of near dormant banks, which have then been relaunched, changes to existing banking licences to allow those banks to enter the savings market and international banks join the market. One of the frustrations for savers with these new entrants is that their best savings rates are often short lived. That's not because they aren't delighted to welcome the new savers who flood to them, but that they simply get overwhelmed with new cash which they ultimately need time to lend out. Therefore, they have to reduce rates or withdraw those products or risk the cost of carrying a vast excess of deposits which they can't lend out.
To illustrate the situation, the two new entrants who have the largest amount of savings are Metro (which has a network of branches) and Aldermore (which is an internet based bank without branches). Both are 10 years old. NS&I has grown its balances by £14.5bn in just the past three months whereas its taken Metro its entire history to achieve this and Aldermore has only just gone over £10bn.
Interest rates on savings accounts had been falling pre-Covid-19 but the coronavirus has accelerated this with the amount of lending by banks, and therefore the need for savings to fund this, falling sharply. We also saw a surge in repayment of debt by individuals during lockdown, Bank of England base rate fall to 0.10% and a new Term Funding Scheme introduced for banks - which offers them a cheaper source of funding for their lending than paying savers interest on their accounts costs. Consequently, interest rates have tumbled. Whereas Atom Bank topped the market for 1 Year at 1.65% at the start of March, BLME does so now at just 1%.
NS&I is now best buy for easy access type products on four accounts (Premium Bonds 1.40%, Income Bonds 1.15%, Direct Saver 1%, Direct ISA 0.90%) and, in my opinion, it is now propping up the savings market. These rates are stopping the collapse of pricing on savings products completely and means that I think pricing will hold at around the current levels.
Given this, rates are unlikely to move until NS&I cut their rates. It has increased its lead over competitors in recent weeks so I expect it's Q2 net financing to be stronger than its Q1. I predict it will be over £30bn up on the year by the end of its Q2. It has to give two month's notice of rate changes. Therefore, it looks likely that rate cuts will be announced in August or September, for implementation in October/November, to stem the inflows to avoid exceeding the top end of its range in its Q3 (October to December 2020). Early September announcement seems the most likely to me, with new rates coming in to effect for November.
During that time, we should see the likes of Zopa, Castle Trust, Oxbury, Vive and JN Bank, who have been awarded banking licences but are not yet live in the savings market, start to offer new products. While this will provide some price support, if NS&I do cut in the later stages of the year, their appetite collectively is only likely to be £1 - £2bn in a quarter. This won't fill the gap so expect any rate cuts by NS&I to trigger further falls in savings pricing.
Published: 15/06/2020
The savings market is probably the most volatile I have seen it in the 12 years I've been in the market. Rates are changing on a daily basis and often what feels like an hourly basis, as providers race to respond to movements from competitors. Here's our round up of the key movements last week and my predictions for the week ahead.
Last week saw another wave of rate cuts in the savings market. Here's a summary of the key changes impacting our best buy tables:
* BLME cut their best buy 1 Year rate from 1.25% to 1% and their 18 month rate was reduced by 0.15% to 1.15%
* Charter Savings withdrew their 1 Year 1.11% rate on Monday, replacing it later in the week with a 0.90% version and similarly their 1 Year ISA went from 0.95% to 0.75%
* Gatehouse Bank cut rates across their entire fixed rate bond range and their fixed rate ISA range
* Ikano Bank took 0.20% off their 1, 2, 3 and 5 Year fixed rates
* Investec Bank withdrew their 1, 18 Month, 2 and 3 Year Fixed Rates from sale
* Marcus by Goldman Sachs closed their online saver to new customers
* Paragon Bank reduced pricing on their fixed rates and ISA fixed rates as well as withdrawing their 40 and 120 Day Notice accounts from sale
* RCI cut its easy access rate from 1.05% to 0.90%
* Secure Trust Bank pulled their 60 day notice account from sale
* Shawbrook Bank cut 0.50% from their 120 Day Notice account
* Smartsave withdrew their 1, 2 and 3 Year fixed rates from sale
The only positive moves was the return of PCF Bank with a 1.12% 1 Year and a 1.26% 2 Year rate, although the 1 Year was withdrawn from sale on Friday evening, and Marcus entering the market with a new 1 Year. Priced at 1%, Marcus is unlikely to see a flood of new money but, the way the market is moving, we may well see that move up the tables quickly.
Looking ahead, I can't see much good news this week. With the movements of the past two weeks, Al Rayan Bank have moved to the top of the many best buy categories, having barely featured prior to that. Expect this to trigger cuts from them towards the end of this week. Atom Bank, having already cut rates twice in as many weeks, will be forced in to a third cut to their 1.15% 1 Year rate. Their 2 Year rate at 1.25% is moving up the tables too and I suspect this to get trimmed also. Reductions or withdrawals are also likely from PCF and Shawbrook's 2 Year rates.
Two weeks ago we had a cluster of banks paying around 1.50 - 1.60% for 5 Year money and I wrote then that I expected this to be enough to hold a headline rate around that level. All have withdrawn or cut rates and BLME's 1.60% rate is now 0.20% clear of nearest rivals RCI and UBL. I can't see this lasting and imagine BLME will have their eye on a cut to this later this week, and astonishing as it is to say this, we will see 5 Year pricing consolidate in the range from 1.30 - 1.40%. With NS&I paying 1.16% on their no notice Income Bonds, this leaves a staggeringly small margin between easy access and 5 Year and I can't see anything changing that in the short term.
I'm afraid it's set to be another week of falling rates for savers as we continue to wait for the bottom of the market. My advice to savers is secure the best rates as soon as you can.
James
Published: 27/04/2020
A new money saving app, Snoop, has launched with the aim of helping us to save up to £1,500 per year.
Published: 08/09/2020
James writes a monthly savings column for Essex based magazines, Beaulieu & Channels. This is a reproduction of his September column.
Interest rates continue to rise on savings
In last month’s column, I wrote about the turnaround in interest rates on savings. Having seen rates tumble from early March through until the end of July, with falls of 40% in some categories, early August saw a revival with a number of rate increases.
The good news for savers is that this has continued through August and into September. What is sustaining it two things. Firstly, the number of banks who are looking to attract savers in to fund growing lending books is growing. Secondly, as I explained last month, the presence of the government backed National Savings & Investments at the top of the easy access tables is forcing banks who do need cash to pay above the 1.16% available on NS&I’s Income Bonds. The increasing number of providers trying to grow their savings books is driving pricing higher as they compete amongst each other at the top of the tables.
At the end of July, BLME were top of the 1 Year best buys paying 1% with every other bank paying 0.95%. BLME are still paying 1% today but this no longer secures them a place in the top 10 as we’ve not only seen the best buys push beyond 1.20%, we have seen a number those lower down the tables improve their pricing too, coupled with some banks coming back in to the market and a new entrant!
Zopa enters the savings market
Late in August, Zopa finally launched a range of fixed rate savings products. Having announced its intention to apply for a banking licence in November 2016, it’s been a long while coming. Has it been worth the wait? The rates themselves haven’t lit up the market as they initially launched in to 6th place in every category, bar 4 Year, where they were 2nd.
However, the application process is slick, taking less than 5 minutes, provides an account confirmation at the end and a sort code and account number to immediately fund the account. One touch I really like is they also give a timeline (30 minutes) for how long it will take to see funds showing in your Zopa account, once you have transferred, and they send an email to confirm receipt of every deposit paid into your account.
Their position in the tables has dropped to 7th, 9th and 10th for all bar the 4 Year (now 3rd) and I suspect this will see Zopa revisit rates later in September or early October. They are well worth a look then if that increase comes.
New entrants could push rates higher
While NS&I maintains its current position in the market, it is likely that rates can continue to increase for as long as competition drives it. The current competition isn’t sufficient to push rates much further on, in my opinion, so it will need some existing banks to come back to market or new entrants. We have four new banks currently authorised but not live – Castle Trust, JN Bank UK, Oxbury and Vive – so their arrival could push rates higher. It’s likely we will see at least two and probably three of those in the market by the end of the year.
At least nine firms who have submitted a banking licence application have yet to receive authorisation. However, almost all of those will have to go through a mobilisation process, which can take up to a year to complete, so they won’t be joining the market until later in 2021. We should start to hear more on their progress from the Bank of England in the next couple of months.
Current account switching offers return
Last month I wrote about the return of the first switching offer for some time with Halifax offering £100 to switch to them. This offer ends on 8th September. However, there are now other offers in the market too.
RBS is offering £100 to switch to two of its accounts by 19th November. Switchers to RBS Reward will have to pay a £2 per month fee for the account but can earn £5 in cashback every month they log in to their account and have two direct debits set up on it. Those moving to RBS Select can get £100 without the monthly fee or cashback.
Metro Bank is also paying £50 if a friend refers you to them, as well as £50 to the referring friend. If you are an existing customer, you can earn up to £250 from referring friends. The referrer needs to complete a registration form on Metro Bank’s website.
Published: 21/07/2020
James writes a monthly savings column for Essex based magazines, Beaulieu and Channels. This is a reproduction of his July column.
Last month I wrote about the steep falls in interest rates we have seen on savings during the Covid-19 lockdown period. Although rates are continuing to fall, the number of cuts is reducing. This is because the government’s savings provider, National Savings & Investments (NS&I), is providing some support to the market with its Income Bonds paying 1.16%, Direct Saver at 1% and easy access ISA offering 0.90%.
I did wonder whether the recent mini-budget might see an announcement of a cut to NS&I’s rates, given their best buy status, but thankfully it didn’t. Given they have to give two months’ notice of changes to rates, this means we are some time off seeing a rate cut at NS&I.
We are now seeing some new product launches – Allica Bank have come back to the market with some very excellent notice, 1 and 2 Year Fixed Rates and Close Brothers similarly have launched competitive 2 and 3 Year rates. We also (very briefly) saw Wesleyan Bank launch a best buy 5 Year fixed and well-priced 18 month bond.
My advice to savers is to grab these rates as soon as you can because, in volatile markets like these, they are unlikely to last. Providers will move in and out of the market quickly so secure them while you can. Remember, many allow a 14 day funding window, so you don’t need to have access to the money you want to save in those accounts there and then.
New banks close to launch
I expect to see some new entrants come into the savings market soon. Zopa have launched a range of fixed rate savings to their existing investors but expect those to be offered more widely – possibly later this month. The newest bank, Castle Trust, have also indicated they will enter the savings market later in July.
JN Bank, Oxbury and Vive Bank all received their banking licences earlier in the year so expect to see them come to the market too – probably in the autumn.
Every new entrant to the savings market has paid attractive rates initially to get a foothold so look out for these new players to see if they launch with some good offers to entice new savers. As they are new, all are likely to only be able to accept a limited amount of savings though so don’t expect good deals to last long!
Why savers should consider notice accounts
When interest rates are falling quickly, notice accounts can be a really good option for savers. The reason for this is because the bank providing them needs to provider savers with at least the equivalent notice period before changing rates. For example, if a bank has a 95 day notice account, if it wants to change the rate on this, it needs to give its savers at least 95 days’ notice of the change, before the rate can be reduced.
Not all banks are good at keeping on top of what is known as their ‘back book’ so often such changes are not implemented particularly quickly, or not at all, meaning that savers benefit. An example of this is BLME who are still paying 1.71% on their first 90 day notice account and 1.51% on their second one. Their current version paying 1.10% is still joint top of market and, based on past performance, doesn’t look like it will get changed quickly if rates fall.
ICICI Bank are currently paying 1.40% on their 95 day notice account. Although they have already announced a cut to 1.10% with effect from 1st September, new savers will still get the higher rate until then and 1.10% is still joint top of market.
New bank Allica is also paying 1.10% and could also be worth a look for similar reasons. While these accounts aren’t immune from falling rates, they are often forgotten and, even if they are cut, the delay involved in reducing the interest rate softens the blow somewhat for savers.
Children’s savings accounts still paying great rates
One area which has seen limited impact from rate cuts is children’s accounts. There are still some fantastic rates to be found if you are saving for your children. Halifax lead the way with a 4% paying regular savings account which as little as £10 per month can be put away in to, up to £100 per month.
Saffron Building Society has long been a great home for children’s savings, and their current regular saver pays 3.02% with a £5 per month minimum saving level and £100 maximum.
NS&I (3.25%) and Coventry (2.95%) lead the way on Junior ISAs, with NS&I only available online whereas Coventry is a branch, post and telephone based account. Both accounts can be opened with just £1 and can be added to as and when.
Published: 26/05/2020
The word 'unprecedented' has been overused in the past two months but these are truly extraordinary times in the savings market. The last couple of days of last week saw some truly remarkable activity in the savings market with a host of providers changing rates. Other than PCF Bank relaunching their 3 Year Fixed Rate, all the pricing movement was downwards. Here's a summary, by product category, of the changes, to put some context to their sheer volume of rates which have been cut:
Easy access
* Aldermore cut their rate from 1% to 0.80%
* Shawbrook reduce from 1% to 0.75%
Notice
* Close withdraw their 95 day notice 1.35%
* Paragon reduce their 120 Day notice from 1.20% to 1.05% and 45 day notice from 1.10% to 1%
1 Year:
* Gatehouse Bank drop their best buy 1.50% to 1.25%
* Hodge Bank cut from 1.34% to 1.20%
* Ikano reduce from 1.36% to 1.21%
* Paragon drop from 1.25% to 1.10%
* Zenith Bank reduce from 1.43% to 1.15%
2 Year:
* SmartSave cut from 1.40% to 1.35%
* Gatehouse drops from 1.60% to 1.35%
* Hodge Bank cut to 1.25%
* Ikano drop from 1.46% to 1.31%
* Paragon reduce from 1.40% to 1.25%
* Shawbrook reduce to 1.25%
* Zenith Bank cut from 1.53% to 1.30%
3 Year:
* SmartSave cut from 1.45% to 1.40%
* Gatehouse reduce their best buy from 1.75% to 1.45%
* Hodge Bank cut to 1.30%
* Ikano drop from 1.56% to 1.41%
* Paragon reduce from 1.50% to 1.30%
* PCF relaunch at 1.50%
* Shawbrook Bank reduce from 1.68% to 1.30%
* Zenith Bank cut from 1.57% to 1.40%
5 Year:
* Gatehouse reduce their best buy from 1.85% to 1.55%
* Ikano drop from 1.71% to 1.56%
* Paragon cut from 1.60% to 1.40%
On top of this, Charter Savings, Gatehouse, Hampshire and Principality all cut or withdrew ISA rates too. Of the ten providers in our 1 Year table, only Atom Bank and BLME (Bank of London & Middle East) remain as they were. All other providers have either cut been promoted in to the tables due to the rate changes.
There are a number of reasons why this is happening. There's been a drop in lending activity which these savings book fund, the new TFSME (Term Funding Scheme for Small & Medium Enterprises) has started to be drawn on by some banks and the Bank of England Base Rate has been cut. However, fundamentally, we are now in a vicious circle where providers are cutting in response to other movements, which then triggers other banks to respond, to avoid getting over liquid with savings. The upshot is, everyone moves! That's ultimately where we got to at the back end of last week where it was possible to see that both the timing of the change, and the rates being moved from/to, in many cases were clearly a reaction not a scheduled change.
The question which savers want to know is where is it going to end. Longer term, that's incredibly hard to predict but short term it is very clear. We are in for more of the same. However, there will be a floor and government owned National Savings & Investments is going to provide that floor. It had a round of planned rate cuts which were due to take place on 1st May. They were pulled in light of Covid-19 and this has now seen their Direct Saver (1%) enter the easy access best buys and, if you class their monthly interest paying Income Bonds (1.16%) as an easy access account, Income Bonds top it.
NS&I works differently to banks and this is going to provide the floor to stop further falls in the short term. In easy access, I expect the position to remain broadly as it is with best buy rates around 1%. For 1 Year Bonds, I expect a fall back towards 1.20 - 1.25%, 2 Year around 1.35%, 3 Year at 1.45% - 1.50% and 5 Year around 1.60%. NS&I don't have a regular scheduled date to review rates so it is impossible to know when they will recommend reductions but, they give two months notice of changes to rates so we are looking at August at the earliest for any cuts. While I expect there will still be much movement and jostling for position, I don't foresee the headline rates changing significantly i.e. the providers may change but expect those best buy rate levels to hold, regardless of which provider is paying those rates.
What do I expect to happen next? BLME now sit top of all bar 5 Year Fixed Rate Bonds so I expect a re-price of their range, in response to the changes. Atom's 1 Year at 1.40% looks unsustainable and I expect that to be cut by the end of the week, by at least 0.15%. Wyelands can also not maintain their 1.30% price point and will cut too and expect Habib Zurich to make yet another cut to their 1 Year too. I don't think we will see anything near Atom's 1.40% or BLME's 1.45% anytime soon so 1 Year savers should secure those while they can.
RCI's 5 Year rate of 1.80% is a historical low for 5 Year savings but this current best buy pricing will look generous by the end of next month. While I cannot recommend locking away money at that price for 5 Years, it will look very competitive to what will be there in the coming weeks.
There will be more volatility in the coming days and weeks but this will stabilise as rates settle around these price points. My advice to savers is secure these rates while you can.
Published: 17/04/2020
Marcus by Goldman Sachs have announced a cut of 0.10% to their best buy easy access account this morning. Hot on heals of its 2020 Q1 results announcement, which showed it has grown to over 500,000 savers in the UK with balances totalling more than £17bn, the bank cut its rate to new customers to 1.20%. Existing customers received notification that the rate on their accounts will reduce to 1.20% from 7th May.
Kent Reliance cut its own easy access rate from 1.20% to 1% this morning too, ahead of the change from Marcus, and Paragon have cut their 1.21% rate to 1% for new customers. These moves all follow Virgin Money's pull back from its best buy of 1.31% to 1.01% last week, in what has been a bonfire of rate cuts for easy access savers.
Ford Money were due to relaunch their flexible saver this morning, but this was pulled however not before coverage of the move appeared alongside the Marcus cut. Its reentry to market will have been welcomed by savers, but the move is understandable in light of competitor pricing movements.
All eyes are on Aldermore Bank now, who sit top of the easy access tables with their 1.25% rate. Although Aldermore, which launched in 2009, now looks after over £10bn of savers deposits, we don't anticipate that it will hold this position for long and expect it to pull back by the end of next week. Savers likely have a short window of opportunity to secure this rate as we expect any new issue to be priced around 1.15 - 1.20%.
With Marcus, Saga, RCI and Investec all priced at 1.20%, and Shawbrook tucked in behind at 1.15%, there's some support at this price level. If Aldermore do drop in to that range and Ford Money re-enter the market, this will further bolster this. However, there's precious little between this and a clutch of providers priced around 1%. Any further downwards movements from this group is likely to trigger further falls towards 1%.
What will be interesting to see is if these price falls trigger a renewed interest in cash ISAs, which have waned in popularity with the advent of the personal savings allowance and pricing typically being lower than their ordinary counterparts. However, with Shawbrook Bank, Bath and Penrith Building Societies all paying 1.25%, easy access cash ISAs now look a much better bet for savers.
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