Do or don't banks want our cash?

Hominu

It seemed that banks didn't want our cash as they reduced the interest to such small amounts due to them getting cheaper funds from the government under the "Funding for lending" scheme.

Why then are the Halifax advertising on TV and the local media about their 2 year fix 2.3% savings account? If you can get cash cheaper elsewhere, why would you advertise for it at significant cost?

Reaper

They can't get all their money from the government, but it has taken all the urgency away. If people are willing to lend them their money for such paltry rates then I am sure it is worth spending a bit on advertising.

Personally all my fixed term lump sum savings are earning between 4 and 5%, and my regular savings 6% and 8%. When they finally expire I will be investing my money rather than saving it at below inflation rates.

talexuser

Hominu wrote: »

If you can get cash cheaper elsewhere, why would you advertise for it at significant cost?

Because the game is market share, and the calculation that a proportion of people will not check rates again for some years and thus lend them money at near zero rates once bonuses have expired before waking up to the fact (if ever)?

mulronie

Banks employ very expensive and large teams in their Treasury functions, and maintain big, expensive models - called Asset & Liability Models - for determining the price they are willing to pay for funding, based on myriad criteria. It's not as simple as "we can borrow cheaper from the BoE, so we will stop pursuing other deposits".

The price banks will pay for a deposit is determined by the 'liability' side of the model, on criteria such as length of term, value of deposit, and type of customer (Public body, Corporate, Personal, and various sub-divisions thereof). Retail customers are prone to let deposits lapse at the end of a fixed term to a paltry rate, which is why banks will pay a premium over other sources of funding to "lure" them in.

rb10

Interestingly the last few rate moves from Lloyds (including Halifax) have been upwards ... indicating that they do have a desire for retail funding at the moment.

cepheus

Hominu wrote: »

It seemed that banks didn't want our cash as they reduced the interest to such small amounts due to them getting cheaper funds from the government under the "Funding for lending" scheme.

Why then are the Halifax advertising on TV and the local media about their 2 year fix 2.3% savings account? If you can get cash cheaper elsewhere, why would you advertise for it at significant cost?

I suppose they still have to compete for long term customers. Once the period ends the interest rate will default to something below 1% and if only half of customers don't take action it's a nice earner. I notice Bank shares are up.

The Funding for Lending scheme was causing further misery by allowing banks to further reduce rates on many savings accounts. At the same time there are concerns that this lending scheme has done little to help get credit through to either first-time buyers or small businesses, but has simply led to cheaper mortgages for those who already have significant equity in their home.

The majority of these home owners did not previously have difficulty accessing mortgage finances, and many were already enjoying the cheapest home loan deals for years, thanks to low interest rates.

At a recent meeting of the Treasury Select Committee Andrew Bailey, the head of prudential regulation at the Financial Services Authority, told MPs that interest rates for borrowers had not come down "to the same extent" as those paid on deposits.
Sylvia Waycot of Moneyfacts.co.uk said: "Savers are being persecuted without borrowers getting the rewards."

http://www.telegraph.co.uk/finance/personalfinance/savings/9831973/Savers-slaughtered-as-rates-slashed-on-100-accounts.html

Jegersmart

The BOE want people to spend.

J

talexuser

Quote
Sylvia Waycot of Moneyfacts.co.uk said: "Savers are being persecuted without borrowers getting the rewards."

But this is exactly how the rest of us are paying to bail out banks that in normal economic terms are probably bust?

Thrugelmir

Hominu wrote: »

It seemed that banks didn't want our cash as they reduced the interest to such small amounts due to them getting cheaper funds from the government under the "Funding for lending" scheme.

Why then are the Halifax advertising on TV and the local media about their 2 year fix 2.3% savings account? If you can get cash cheaper elsewhere, why would you advertise for it at significant cost?

To earn your interest. Banks need to lend the money out. If borrowing costs were to high. Then demand would fall.

FFL only applies to new lending. Banks still need to fund existing.

If you are complaining that savings rates that aren't keeping up with inflation that's a different matter.

We are all paying the price for the credit boom.

opinions4u

Savings accounts have rarely kept up with inflation for any extended period.

C_Mababejive

The ordinary people on the street are just sheep for shearing. The nice person at the bank may smile but really,they have a secret agenda to screw you over. The country is awash with money. Banks and building societies have plenty of it. The government gave them lots and apathetic savers continue to trust them with their money. If there is any need for more money,why the government will just print some IOUs.

Its taken a while but many of us are now waking up to what money really is.