Nat West - how long will the 3.5% rate last on pre 15th May ISA's

Mr_K

They don't need to attract new customers with a 3.5% rate any longer. It was just to attract new money. The rate will decrease and they'll rely on customers not being bothered to move. Wouldn't surpirse me if the rate on this is 1.5% within 6 months. Common practice these days.

You'd swear they're just out to make money....

digivate

adambro wrote: »

I would though question the suggestion that NatWest would really need to justify their decision to anyone if they did.

They could quite easily justify it by saying, for example, they've held the rate up for a good period despite the base rate cuts so benefiting customers but it is no longer sustainable.

I understand that they've made no commitment to tracking the base rate, but at the same time I still don't believe they can justifiably decrease their rate without good reason. This is particuarly true of ISA accounts, as you are only permitted to open one new account per financial year so you are effectively tied to that account for 12 months. If they dropped the interest rate just a few months after introducing the account there would be an outcry. Yes, banks try to maximise prfoits but they're not quite as bad as that.

I may be being niave, but I won't be at all surprised if the Natwest rate stays fairly high for the next 12 months. I'm fairly certain however that the rate will drop drastically to some pathetic rate at the beginning of the next financial year and that Natwest are actually banking on the fact that people won't transfer the existing balances then (as many people don't).

Elderflower

Having opened my e-Isa on 1st May, I was just about to transfer my Egg isa when the interest rate dropped. I phoned Natwest who assured me I'd still get the pre-14th May interest, and 3.5 if I transfer my Egg ISA, but when pressed, couldn't say how long for. "It's a variable rate" they told me. To transfer or not to transfer, that is the question! Egg's rate is now pathetic so it must go somewhere.

Baldur

Elderflower wrote: »

Having opened my e-Isa on 1st May, I was just about to transfer my Egg isa when the interest rate dropped. I phoned Natwest who assured me I'd still get the pre-14th May interest, and 3.5 if I transfer my Egg ISA, but when pressed, couldn't say how long for. "It's a variable rate" they told me. To transfer or not to transfer, that is the question! Egg's rate is now pathetic so it must go somewhere.

There are fixed-rate Cash ISAs offering around 3% which accept transfers, e.g. Halifax ISA Direct Reward.

digivate

Does anyone have experience of a variable ISA rate falling within the first twelve months of opening with no relation to changes in underlying base rates?

I've just searched for a definition of the term "variable rate" and in most cases the results state that a variable rate is tied to an underlying index ...

http://www.google.co.uk/search?q=define:Variable+rate

BruceyBonus

digivate wrote: »

I understand that they've made no commitment to tracking the base rate, but at the same time I still don't believe they can justifiably decrease their rate without good reason. This is particuarly true of ISA accounts, as you are only permitted to open one new account per financial year so you are effectively tied to that account for 12 months. If they dropped the interest rate just a few months after introducing the account there would be an outcry. Yes, banks try to maximise prfoits but they're not quite as bad as that.

You aren't tied to the account for 12 months. You can open another one and transfer the old ISA. You aren't limited to opening one account a year, but rather paying new money into one ISA a year. A transfer isn't new money.

And their justification for dropping the rates?

Account_T&Cs wrote:

10.3.2 We may also change the interest rates which apply to your account for any other valid reason.

digivate

BruceyBonus wrote: »

You aren't tied to the account for 12 months. You can open another one and transfer the old ISA. You aren't limited to opening one account a year, but rather paying new money into one ISA a year. A transfer isn't new money.

Oh, I didn't realise that.

BruceyBonus wrote: »

10.3.2 We may also change the interest rates which apply to your account for any other valid reason.

That's my point ... they need to have some kind of valid reason (i.e. a rate drop or something similar). I don't think they can drop their rates on a whim purely to increase their profits.

BruceyBonus

digivate wrote: »

That's my point ... they need to have some kind of valid reason (i.e. a rate drop or something similar). I don't think they can drop their rates on a whim purely to increase their profits.

They will make up any old reason to lower the rate. Banks/BSs are doing this all day, every day because they can. That is the whole point of variable accounts - they can change the rate as they please.

digivate

BruceyBonus wrote: »

They will make up any old reason to lower the rate. Banks/BSs are doing this all day, every day because they can. That is the whole point of variable accounts - they can change the rate as they please.

Generic comments such as "banks spend all their time ripping us off" just seem a bit pointless. All I'm hearing so far is conjecture and opinions ... I'd rather rely on facts to make my decisions. If Natwest change their e-ISA rate I'll move my money elsewhere, but so far I've heard nothing concrete that gives me any reason to believe that the rate will drop within the next 12 months.

I've already asked this but does anyone have any actual experience of a bank dropping the rate on a variable ISA, for any reason other than a reduction in base rate, within 12 months of an account opening? If they do then they've got an opinion worth sharing, otherwise it's just a case of people enjoying a good moan about the possibility of something happening that most probably won't happen anyway.

adambro

digivate wrote: »

This kind of generic "banks spend all their time ripping us off" comment is just pointless.

I don't think it was a generic ""banks spend all their time ripping us off" comment, rather simply an observation that the variable rate offers the banks the flexibility to change them as they please. I don't think banks "spend all their time ripping us off" but they certainly do spend all their time trying to maximise profits, that is the aim of any business and so it isn't having a go at banks to suggest they will change the rates when it suits them.

digivate wrote: »

I've already asked this but does anyone have any real experience of a bank dropping the rate on a variable ISA, for any reason other than a reduction in base rate, within 12 months of the account opening - or is it a case, as I expect, of people moaning about the possibility of something happening that probably won't happen anyway.

I think it would be difficult for anyone to come up with an example because such an occurrence is naturally going to be rare. It is worth nothing here though that NatWest didn't drop the rate in response to the rate changes so it could be said that they haven't been taken into account yet so a reduction now could still be justified as a reaction to the BoE's base rate cuts. My point is not that a rate cut is inevitable, just that account holders shouldn't be too surprised if one occurred nor will they have much reason to complain if it does happen. It is a variable rate and that means the rate is, well, variable.