Fixed Term Accounts - reduction in rates

lotty13

Does anyone know why the banks are reducing their interest rates on fixed term accounts. We are due to renew one 1st July and had to negotiate to keep the same rate with them because they were reducing theirs and just had another email from another bank to say if we wanted an account to do it prompto cos they were reducing their rates in the next couple of weeks. They are bad enough as it is without going down again!!!!

Mickygg

Banks and BS's are moving into the mortgage market to get more money as this is seen as better earnings for them. They are therefore reducing rates for savers to account for this.

Mortgages and loans are seen as more money at the moment, being supported by the reduction in savers interest rates.

The economists though think later in the year these rates should pick up as overseas banks and competitions should drive rates back up.

Paul_Herring

lotty13 wrote: »

Does anyone know why the banks are reducing their interest rates on fixed term accounts.

Have you seen the economy lately?

cocktail

interest rates are going up, hence saving rates are expected to go up. it makes sense for banks to fix customers money in lower fixed rates now as most of these accounts have a maturity of atleast 1 year

opinions4u

lotty13 wrote: »

Does anyone know why the banks are reducing their interest rates on fixed term accounts. We are due to renew one 1st July and had to negotiate to keep the same rate with them because they were reducing theirs and just had another email from another bank to say if we wanted an account to do it prompto cos they were reducing their rates in the next couple of weeks. They are bad enough as it is without going down again!!!!

Swap rates are down quite significantly compared to where they were 6 months ago. In other words, banks can raise money for less elsewhere, so don't have to pay savers more.

Turn the clock back a couple of years, and a 2 year fix would pay you around 6%. Despite the sharp drop in base rates, a 2 year fix today would still pay you around 3.5%.

Even at 3.5%, I'd expect the bank to be making a loss - they will probably only be paying such a rate to maintain their balance sheet which in turn keeps their business stable.

As the credit markets continue to ease, I'd expect fixed rates to fall further.

Out of interest, which provider allowed you to "negotiate" a higher rate?

lotty13

Anglo Irish in the IOM (offshore account) They were advertising 3.4% for 1 yr fixed and they told us they were going to be reducing it in next cple of weeks when we applied, which happens to be today I see. (down to 3%) I told them our other fixed rate account with them didn't end till the 30th June and if we stayed loyal to them!!! wd they keep it at that rate. They said yes.:j I know its not a lot, but it helps. They also have an instant access account for 2.8% which is very good (£5,000 min.opening balance)