Egg 6.3% fixed - can they cope?

pmorrison_2

Hi, I have one of the 6.3% 1 year fixed Egg accounts, as I know many others on these boards do. What I was wondering is, can they afford to honour these rates? With many other institutions cutting instant access rates to sub 4%, does that mean that Egg are actually losing money on these accounts?

Obviously they cant pull these accounts (or at least I assume they cant...), but is it possible that they will put an extra strain on Citigroups already struggling business?

Lokolo

The reason banks have put rates down is because the bank of england rate has dropped.... so if they all follow each other its fine.

opinions4u

There is a reasonable chance that they 'hedged' against interest rate cuts.

While this will have cost them an initial outlay, their "insurance policy" via the hedge will be covering any losses on initial funds invested.

What will almost certainly drive them in to loss on the deal will be any other deposits added after the offer expired - but this will usually be a relatively small part of their overall book, so while painful won't be pushing Citibank over the edge!

Mr_K

6.3% won't cripple them, they might make a loss but Egg must be insignificant in Citigroups finances. I'll be filling mine to the max. (ie. well, up to about 48k )

pmorrison_2

Lokolo wrote: »

The reason banks have put rates down is because the bank of england rate has dropped.... so if they all follow each other its fine.

But with these fixed Egg accounts they cant follow suit, they are stuck with them for a year from the date of opening.

Lokolo

pmorrison wrote: »

But with these fixed Egg accounts they cant follow suit, they are stuck with them for a year from the date of opening.

As are banks which advertised 7% 2 year fixed a year ago

Egg aren't the only bank to have higher fixed rates going than the base rate.

pmorrison_2

Very true, hadnt thought about the past rates offered!

I will be putting the bulk of my savings with them (including my Icesave ISA money I have just received!), I have a bit with Halifax and then A&L, so hoping thats spread out enough should the worst happen!

Lynt_3

Mr_K wrote: »

6.3% won't cripple them, they might make a loss but Egg must be insignificant in Citigroups finances. I'll be filling mine to the max. (ie. well, up to about 48k )

Me too
Go Egg Go!