How do banks make money on savings?

Secret_Wookie

Always wondered how banks actually make money from savings accounts?

I understand that it is linked to the bank of England Base Rate and that anything paying above this is usually making a loss and this is why the best
deals paying above 4.5% tend to be short lived.

If my account is paying over 4.5% Gross is it likley that the bank is losing money providing it?

Andy_L

They loan your savings out to somone else at a higher rate of interest than they are paying you.

tanith

There is no danger of a bank losing money on your savings Secret Wookie:rotfl:

Chrismaths

They are probably paying more to get money in now and will subsequently cut the rate.

Mr._OCaz

haha, banks make billions every year don't lose sleep over it.

Also they invest money, as well as borrow money to it to other people.

If the bank were losing on the type of account you use then they wouldn't offer it. Case in point looking at the balance transfer market for credit cards - Now majority of lenders charge a handling fee for this now.

dunstonh

money markets and borrowing are the main sources.

All those personal loans at 9% give them a lot of scope to pay 4% and still turn a profit.

Tiggs_2

dunstonh wrote:

money markets and borrowing are the main sources.

All those personal loans at 9% give them a lot of scope to pay 4% and still turn a profit.

So in effect they are charging you 5% on your savings.....far better to be a loan shark yourself

dparky

Exactly. Banks would be nothing if no one banks.
So they pay you 4.5% for your savings, and they lend your money to someone that wants a mortgage and charge say 10%. That means they make 10 times more than you... because an avergae mortgage is around 100-150k.