September magazine column
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.