Marcus rate cut to herald further easy access falls

19/12/2019

The Bank, which launched in the UK in September 2018, initially started business with an underlying 1.35% AER rate topped up with a 0.15% bonus, which was a best buy at the time and remained so for much of its first year after launch.  In September, the bonus was reduced to 0.10%, although readers who followed our advice in the column of the same month were able to renew this bonus for a further twelve months.

Yesterday, the bonus element was removed completely for new customers, who will now received the standard 1.35% AER.  Although this remains highly competitive in the market, it is beaten by the 1.41% offered by Shawbrook and Gatehouse Bank's 1.40%.  Ford Money also offers 1.35% and savers may prefer this as Ford offer a best rate guarantee so savers benefit if they increase the rate and any reductions come with 60 days notice.

We anticipate the move will see further falls in easy access rates as we believe Shawbrook will not be able to sustain their 1.41% rate and will reduce their pricing before the end of the month to fall back between 5 - 10 basis points.  This will then put pressure on Gatehouse Bank who we think will have no choice but to follow suit.  With Britannia (1.30%) and Aldermore (1.25%) providing support below Marcus and Ford Money, we anticipate the best buys will then hold in the range of 1.30% - 1.35% with a likely cluster of banks in or around this pricing.

Before the removal of the bonus rate, Marcus had been joint top for several months alongside Virgin Money but Virgin dropped to 1.21% last week and this sharp reduction is likely to have triggered this move.  Marcus has grown to manage £12bn of UK savings deposits and although they are a way off the UK ring fencing limit of £25bn, which would require them to separate Marcus from the investment banking part of the Bank, Marcus seem to have an appetite to slow the growth of their easy access book.  This may signal a shift in focus as Marcus is also set to start offering stocks and shares ISAs, in partnership with Nutmeg, who it led a £45m investment into in January 2019.  The ISA will be offered under the Marcus brand and is expected to launch next month.  Marcus recently changed its terms and conditions, hinting strongly that further new product launches could be on their way.

While this rate cut is bad news for savers, Marcus has helped sustain a competitive easy access market since its inception and its continued presence in the market will provide support to rates which would fall further, were it not there.