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The week in savings - w/e 22nd October

 

Monday 18th October

SmartSave Bank kicked the week off by relaunching two fixed rates
* 1 Year - 1.31% (5th in market)
* 2 Year - 1.57% (4th)

Recognise Bank withdraw their 5 Year Fixed Rate from sale, which was paying 2% and a joint best buy.

 

Tuesday 19th October

Gatehouse increased their 4 and 5 Year Fixed Rates to 1.92% and 2.05% respectively, taking the best buy position in both categories.

Zopa cut their 1 Year Fixed Rate from 1.30% to 1.26%, dropping to 8th in the market and announce they have completed a £220m fundraise, led by SoftBank’s Vision Fund. The Bank also reveals it has attracted £675m of savings on to its fixed rate accounts and is on track to reach profitability in the next 10 weeks.

 

Wednesday 20th October

Cashplus Bank announces it has been awarded £5m from the Banking Competition Remedies fund which will fund initiatives including a new SME credit card with 1% cashback and tools to help small businesses with Making Tax Digital.  The Bank has £500m of deposits already from SME savers and serves 1.6m customers with a 7% share of all new UK businesses.

 

Thursday 21st October

Shawbrook Bank were the first to move in what was a very busy Thursday in the market.  They increased a number of their savings rates:
* Easy Access - 0.62% (3rd in market)
* Easy Access ISA - 0.57% (4th)
* 2 Year Fixed ISA - 1.06% (joint 3rd)
* 3 Year Fixed ISA - 1.12% (5th)
* 5 Year Fixed ISA - 1.30% (joint 5th)

Secure Trust Bank improved their pricing on several products:
* 1 Year ISA - 0.85% (joint 4th in market)
* 2 Year ISA - 1.05% (joint 5th)
* 3 Year ISA - 1.10% (joint 7th)
* 5 Year ISA - 1.30% (joint 5th)

* 90 Day Notice - 1% (joint 6th)
* 5 Year Fixed - 1.90% (4th)

Gatehouse Bank cut their short term fixed rates:
* 1 Year - 1.30% (now joint 5th in market)
* 18 Months - 1.40% (3rd)
* 2 Year - 1.60% (joint 2nd)

Hampshire Trust Bank increased their ISA rates:
* 1 Year Fixed - 0.85% (joint 4th in market)
* 2 Year Fixed - 1.05% (joint 5th)

Charter Savings Bank improve some of their pricing:
* 18 Month Fixed - 1.51% (2nd)
* Easy Access ISA - 0.56% (5th)
* 1 Year Fixed ISA - 0.87% (2nd)

 

Friday 22nd October

Furness Building Society increase their 2 Year Fixed ISA rate to 1.05% (joint 6th in market)

Hodge Bank improved their ISA pricing:
* 2 Year - 1.10% (joint 2nd)
* 3 Year - 1.21% (joint 2nd)

Kent Reliance increased several rates with the pick of them being:
* Easy Access ISA - 0.45% (joint 7th)
* 1 Year Fixed ISA - 0.85% (joint 5th)
* 2 Year Fixed ISA - 1.05% (joint 6th)

* 1 Year Fixed Rate Bond - 1.33% (joint 3rd)
* 2 Year Fixed Rate Bond - 1.50% (joint 7th)

Paragon Bank raised their ISA rates, including two new best buys:
* 1 Year - 0.91% (new best buy)
* 2 Year - 1.11% (new best buy)
* 3 Year - 1.21% (joint 2nd)

Redwood Bank upped their 1 Year Business Fixed to 1.15% to become best buy

UBL Bank, who were already best buy, increased rates on their long term ISAs:
* 3 Year - 1.31%
* 5 Year - 1.61%

The big news of the day came from NS&I, who launched its green savings bonds.  Announced in the Spring Budget, the 3 Year Fixed Term bonds are on sale online for at least the next three months with a minimum purchase of £100 (max. £100,000) paying 0.65% AER for the term.

Having originally been announced as being launched in the summer, the savings market had assumed the delays to the ‘green bonds’ were to avoid the volatile pricing market we saw in August, and allow HM Treasury and NS&I to price with a competitive rate for savers but without distorting the market again as they did in Q4 2020. 

The rate of 0.65% is beaten by over 50 providers in the 3 Year market (and matched by easy access rates from Coventry Building Society and Family Building Society). The best buy rate for 3 Years (of 1.81% from JN Bank and Al Rayan) is almost three times that on offer from the green bonds. 

Research found that around 80% of people aged between 25-44 would be very or fairly interested in the concept of a green savings product, and that 42% of 18–34-year-olds would be willing to accept a lower return on their savings if they knew their money was being put towards green projects.

While the aim of the bonds is very noble, I think their research has misjudged how much savers will be prepared to forgo on rate to support green causes. I’ll be astonished if they attract £100m at these rates, let alone the £15bn they are aiming to raise.

I do wonder if HM Treasury and NS&I will have to rethink the rate on this, otherwise I'm sure they will have to accept inflows significantly less than the £15bn targeted

 

Summary

It was good to see SmartSave and Kent Reliance improve their 1 Year Fixed Rates to help consolidate pricing in this market.  Al Rayan’s rates now look unsustainable, and I expect them to be cut in the next fortnight with the best 1 Year rates likely to group between 1.30% - 1.35%.  Similarly, 2 Year Fixed Rates will amalgamate around 1.55% - 1.60%.

Long term rates have been boosted by JN Bank’s increases to 3, 4 and 5 Year Fixed Rates, with Gateshouse responding to their changes this week.  I don’t see much support behind these rates so this may be as good as it gets for long term savers right now.

The one area I expect some positive movement for savers is 1 and 2 Year Fixed Rate ISAs were competition is strongly consolidated around 0.85% - 0.91% on 1 Year and 1.05% - 1.11% on 2 Year.  It looks like only a matter of time before a provider breaks out of these ranges.

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