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  • FIRST POST
    • Special_Saver2
    • By Special_Saver2 21st Jul 07, 7:18 PM
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    Special_Saver2
    How can regular savings accounts offer such good interest rates?
    • #1
    • 21st Jul 07, 7:18 PM
    How can regular savings accounts offer such good interest rates? 21st Jul 07 at 7:18 PM
    I have been wondering - how can regular savings accounts offer such good rates?

    If you look at the top accounts in my best regular savings thread here, you can see that lots of providers have been paying interest rates of 1.0-1.5% gross p.a. over and above the Bank of England base rates. The catch is that they limit the amount of money that you can pay in each month but you can vary the amount you pay in and even get all your money back immediately without penalty once per year. These accounts are open to both new and existing customers.

    Yorkshire BS, Bath BS, Nationwide BS, Scarborough BS and Monmouthshire BS all have accounts that fit this description. Principality BS has been reasonable too, paying 0.7% gross p.a. above base rate. (I am waiting for the effects of the July base rate increase to filter through but the above has been true so far.)

    I know they lend the money out to people with a mortgage at higher rates but surely once you take into account the administration costs of opening up and servicing these accounts, the profit margin must be extremely slim.

    For the regular savings accounts that are only open for 12 months, I imagine that the banks and building societies are expecting a fair number of people to leave the money in a poor paying account after the 12 months are up and they are happy to gain a few new customers who they can try and sell other products to. Some providers also tie the high interest regular savings account to taking out other accounts and products.

    Those first few providers that I mentioned, however, let you carry on saving at very good interest rates beyond 12 months.

    How can they afford to do this?
Page 1
  • padders
    • #2
    • 21st Jul 07, 7:50 PM
    • #2
    • 21st Jul 07, 7:50 PM
    http://en.wikipedia.org/wiki/Loss_leader
    • bristolleedsfan
    • By bristolleedsfan 21st Jul 07, 7:53 PM
    • 7,462 Posts
    • 9,622 Thanks
    bristolleedsfan
    • #3
    • 21st Jul 07, 7:53 PM
    • #3
    • 21st Jul 07, 7:53 PM
    I have been wondering - how can regular savings accounts offer such good rates?

    If you look at the top accounts in my best regular savings thread here, you can see that lots of providers have been paying interest rates of 1.0-1.5% gross p.a. over and above the Bank of England base rates. The catch is that they limit the amount of money that you can pay in each month but you can vary the amount you pay in and even get all your money back immediately without penalty once per year. These accounts are open to both new and existing customers.

    Yorkshire BS, Bath BS, Nationwide BS, Scarborough BS and Monmouthshire BS all have accounts that fit this description. Principality BS has been reasonable too, paying 0.7% gross p.a. above base rate. (I am waiting for the effects of the July base rate increase to filter through but the above has been true so far.)

    I know they lend the money out to people with a mortgage at higher rates but surely once you take into account the administration costs of opening up and servicing these accounts, the profit margin must be extremely slim.

    For the regular savings accounts that are only open for 12 months, I imagine that the banks and building societies are expecting a fair number of people to leave the money in a poor paying account after the 12 months are up and they are happy to gain a few new customers who they can try and sell other products to. Some providers also tie the high interest regular savings account to taking out other accounts and products.

    Those first few providers that I mentioned, however, let you carry on saving at very good interest rates beyond 12 months.

    How can they afford to do this?
    Originally posted by Special_Saver2
    ive answered this in other thread u asked question in, it should be remembered that the average saver wont be able to afford to pay 200.00 a month into nationwides reg saver those who cant or dont will be getting poor rates from nationwide reg saver.
    • missile
    • By missile 21st Jul 07, 10:30 PM
    • 8,992 Posts
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    missile
    • #4
    • 21st Jul 07, 10:30 PM
    • #4
    • 21st Jul 07, 10:30 PM
    Similar way that supermarkets sell petrol less than cost. Many regular savers are loss leaders to suck you into having their current account and most (like NW) have strings attached.
    "A nation's greatness is measured by how it treats its weakest members." ~ Mahatma Gandhi
    Ride hard or stay home
    • ManAtHome
    • By ManAtHome 22nd Jul 07, 12:07 AM
    • 8,168 Posts
    • 5,300 Thanks
    ManAtHome
    • #5
    • 22nd Jul 07, 12:07 AM
    • #5
    • 22nd Jul 07, 12:07 AM
    Must be a bit marginal now you can get 6.7% on 1-3 year fixed accounts (best standard account is 6.25% so tranferring from this into a reg saver, you'd need around 7.2% to get the same interest).
    • Thomas Crown
    • By Thomas Crown 22nd Jul 07, 3:10 AM
    • 646 Posts
    • 153 Thanks
    Thomas Crown
    • #6
    • 22nd Jul 07, 3:10 AM
    • #6
    • 22nd Jul 07, 3:10 AM
    Must be a bit marginal now you can get 6.7% on 1-3 year fixed accounts (best standard account is 6.25% so tranferring from this into a reg saver, you'd need around 7.2% to get the same interest).
    Originally posted by ManAtHome

    Leeds BS are offering 6.7% on 2 or 3 year fixed rate bonds but who knows what interest rates will be doing over that time scale? Halifax regular saver is currently at 7% fixed for 1 year so if interest rates are higher come the account anniversary the rate may have risen. LTSB regular saver is offering 8% fixed for 1 year so the same applies after 1 year.

    Interest rates are likely to rise again in August & possibly once more later in the year. Who knows what will happen after that, it's all just speculation?
    • Special_Saver2
    • By Special_Saver2 22nd Jul 07, 10:43 AM
    • 1,088 Posts
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    Special_Saver2
    • #7
    • 22nd Jul 07, 10:43 AM
    • #7
    • 22nd Jul 07, 10:43 AM
    Thought I would quickly give a link to bristolleedsfan's answer from another thread.

    http://forums.moneysavingexpert.com/showthread.html?p=5808117#post5808117

    I imagine that Yorkshire BS and some of the other providers will continue to avoid passing on the full 0.25% interest rate rises in order to help improve their profitability.
    • ManAtHome
    • By ManAtHome 22nd Jul 07, 11:09 AM
    • 8,168 Posts
    • 5,300 Thanks
    ManAtHome
    • #8
    • 22nd Jul 07, 11:09 AM
    • #8
    • 22nd Jul 07, 11:09 AM
    Interest rates are likely to rise again in August & possibly once more later in the year. Who knows what will happen after that, it's all just speculation?
    Originally posted by Thomas Crown
    Too true (although my guess is September and possibly November).

    Not that I'm cynical or anything, but 3 years will get us past the next general election whenever it's called...
    • emma396
    • By emma396 22nd Jul 07, 11:38 AM
    • 755 Posts
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    emma396
    • #9
    • 22nd Jul 07, 11:38 AM
    • #9
    • 22nd Jul 07, 11:38 AM
    plus they usually only last one or two years b4 it gets converted into a much lower interest account.
    • Thomas Crown
    • By Thomas Crown 22nd Jul 07, 12:51 PM
    • 646 Posts
    • 153 Thanks
    Thomas Crown
    plus they usually only last one or two years b4 it gets converted into a much lower interest account.
    Originally posted by emma396

    That's right Emma, it's very important to get your money out at the end of the regular saving period, usually one year. Then re-invest it, possibly in next year's ISA. I use a regular savings account for my holiday savings, it runs from April - April (Halifax). I've been saving this way for 3 years now.
    • bristolleedsfan
    • By bristolleedsfan 22nd Jul 07, 1:46 PM
    • 7,462 Posts
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    bristolleedsfan
    Must be a bit marginal now you can get 6.7% on 1-3 year fixed accounts (best standard account is 6.25% so tranferring from this into a reg saver, you'd need around 7.2% to get the same interest).
    Originally posted by ManAtHome
    and thats assuming that the 6.25% account will transfer funds direct to the regular savers, its unclear what experiences people have had regarding this. ( otherwise involves transferring funds back to current account) many people are feeding from accounts paying less than 6.25% gross.
    • bristolleedsfan
    • By bristolleedsfan 22nd Jul 07, 1:51 PM
    • 7,462 Posts
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    bristolleedsfan
    Thought I would quickly give a link to bristolleedsfan's answer from another thread.

    http://forums.moneysavingexpert.com/showthread.html?p=5808117#post5808117

    I imagine that Yorkshire BS and some of the other providers will continue to avoid passing on the full 0.25% interest rate rises in order to help improve their profitability.
    Originally posted by Special_Saver2
    i wouldnt be suprised if yorkshire BS add just 0.15% to its reg saver following last base rate increase, if yorkshire BS pass on the full 0.25% then i would see that as a sign that yorkshire BS are serious about keeping its regular saver account as the top paying savings account.
    • Special_Saver2
    • By Special_Saver2 22nd Jul 07, 2:32 PM
    • 1,088 Posts
    • 3,670 Thanks
    Special_Saver2
    Well, Nationwide must be serious about their product - they are guaranteeing their rate will stay in line with base rates until 1st January 2010 (effectively Bank of England base rate + 1% gross pa) and you can get £3,000 every year into their regular saver without a fixed maturity date for the account.

    By the way, isn't it funny how a guarantee until 1st January 2010 sounds so much better than a guarantee until 31st December 2009?

    To me, the end of 2009 only feels about 2 and a bit years away, whereas 2010 feels really far in the future - it is not until the next decade.
    • bristolleedsfan
    • By bristolleedsfan 22nd Jul 07, 2:58 PM
    • 7,462 Posts
    • 9,622 Thanks
    bristolleedsfan
    Well, Nationwide must be serious about their product - they are guaranteeing their rate will stay in line with base rates until 1st January 2010 (effectively Bank of England base rate + 1% gross pa) and you can get £3,000 every year into their regular saver without a fixed maturity date for the account.

    By the way, isn't it funny how a guarantee until 1st January 2010 sounds so much better than a guarantee until 31st December 2009?

    To me, the end of 2009 only feels about 2 and a bit years away, whereas 2010 feels really far in the future - it is not until the next decade.
    Originally posted by Special_Saver2
    nationwide started the account with a lower rate than some of the other regular savers, nationwides regular saver is the only or one of very few that operate on tiered rates with a lower rate being paid in any month that a withdrawal of capital is made. ( the more someone saves the more they lose in the month when they make a capital withdrawal.

    whats so great about being able to drip feed 250 per month into nationwides reg saver paying 6.5% gross when someone can put their lump sum into a 1 year fixed account paying 6.7% on the whole balance from day 1. :confused:

    theres nothing unusual or special about base rate + 1% ( with strings)
    loughborough BS offered base rate + 2.5% guarantee on its reg saver for 2 years.

    a base rate + 1% guarantee is quite common, personally i believe that its sad that nationwide as biggest building society with all the money they spend on continual peak tv advertising werent able to offer base rate + 1% guarantee on all monthly balances increases.
    Last edited by bristolleedsfan; 22-07-2007 at 3:05 PM.
  • RayWolfe
    Yes, that would be nice but who else offers you the opportunity to take out cash whenever you need it as often as you want? Who else has no time or value limit? Who else gives you access by transfer or cash machine? Who else enables you to put money in via transfer, cheque or even cash and again as often as you want?
    Cor blimey I sound like a NW salesman! Maybe I'm biased because I have a NW current account and I get instant debit/credit. ;-)
  • dwsjarcmcd
    Regular saving accounts are there to do a couple of things
    1. Get PR for the bank or building society and
    2. Get you as a customer so you can be cross sold to.
    • bristolleedsfan
    • By bristolleedsfan 22nd Jul 07, 6:06 PM
    • 7,462 Posts
    • 9,622 Thanks
    bristolleedsfan
    Yes, that would be nice but who else offers you the opportunity to take out cash whenever you need it as often as you want? Who else has no time or value limit? Who else gives you access by transfer or cash machine? Who else enables you to put money in via transfer, cheque or even cash and again as often as you want?
    Cor blimey I sound like a NW salesman! Maybe I'm biased because I have a NW current account and I get instant debit/credit. ;-)
    Originally posted by RayWolfe
    reason nationwide are giving so many opportunities to withdraw funds from the regular saver is they are hoping people will only qualify for the lower rates, when nationwide devised the terms and conditions it didnt envisage that people would effectively withdraw/pay in the same money through out a month + put in net 200-250 per month, if someone withdraws 51.00 + in a month and pays in 250.00 per month as an example they get a lower rate of interest for that month.

    i got a nationwide current account as well
    Last edited by bristolleedsfan; 22-07-2007 at 6:08 PM.
    • Thomas Crown
    • By Thomas Crown 22nd Jul 07, 6:29 PM
    • 646 Posts
    • 153 Thanks
    Thomas Crown
    whats so great about being able to drip feed 250 per month into nationwides reg saver paying 6.5% gross when someone can put their lump sum into a 1 year fixed account paying 6.7% on the whole balance from day 1. :confused:
    Originally posted by bristolleedsfan

    ''6.7% on the whole balance from day one''???

    Leeds BS only offer 6.7% on 2 or 3 year fixed rate bonds. Who is offering 6.7% on a 1 year fixed account?
    • bristolleedsfan
    • By bristolleedsfan 22nd Jul 07, 6:45 PM
    • 7,462 Posts
    • 9,622 Thanks
    bristolleedsfan
    ''6.7% on the whole balance from day one''???

    Leeds BS only offer 6.7% on 2 or 3 year fixed rate bonds. Who is offering 6.7% on a 1 year fixed account?
    Originally posted by Thomas Crown
    http://www.moneyfacts.co.uk/savings/bestbuys/fixed-rate-savings-accounts.aspx

    around 4th working day same as cheques/bacs transfers paid into most accounts

    bmw accounts are managed by newcastle building society.
    Last edited by bristolleedsfan; 22-07-2007 at 6:48 PM.
    • Thomas Crown
    • By Thomas Crown 22nd Jul 07, 7:00 PM
    • 646 Posts
    • 153 Thanks
    Thomas Crown
    Thanks for that link, bristolleedsfan.

    I already have dealings with Newcastle BS because they swallowed up the excellent Universal BS.
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