Why Are ISA Rates So Bad, Especially Internet Accounts?

cwcw

Just had an email today informing me that NatWest are doing me the great favour of simplifying their product range, meaning my ISA rate with them will be slashed.

I have just run a comparison of current best buy ISAs, and the top few that manage to get (just) beyond 2% are all non-internet managed accounts. Why is this? Banks have practically forced internet banking on to us over the years, and it's surely cheaper for them for the customer to do their own leg work online rather than having to deal with post or in-branch accounts, so why are the internet accounts suddenly the worst deals?!

I have an in-branch only account with Halifax for our daughter's Junior ISA and it's a 16 mile round trip to the nearest branch and they haven't posted me a statement since I opened it over a year ago. I'm essentially paying money in each month with blind faith. I'd rather avoid that if possible. Anyone know of any decent ISAs with online access?

Also as a general rant, why are ISA rates still being cut lower and lower when the base rate hasn't moved for 4 and a half years? Economic indicators are that rates should be increasing in the next year or 2.

Caprylate

Funding for lending is the cause. I'd post a link but apparently because I'm a new member I'm not allowed to post web links. However gov DOT uk/government/policies/making-it-easier-to-set-up-and-grow-a-business--6/supporting-pages/getting-banks-lending

Doing the above creates an almost web link which will bring you to the correct website if you don't do a literal copy and paste.

cwcw

That explains the general poor rates, but not specifically the really poor rates on internet based accounts, where surely the overheads for the bank are lower. Postal accounts involve postal charges both ways and admin handling, so I can't see why banks are seemingly trying to push customers (through higher rates) into these rather than online.

tell_it_how_it_is

I guess in part postal access only is considered for accounts where they only want a certain level of interest and take up, as their type do indeed put plenty of people off bothering. Plus it keeps them actively seen in those best buy tables.

brewerdave

Cynical view -they really don't want your money at the moment- suspect the amount they get now thru postal accounts is dwarfed by internet savings, so they use postal accounts as a "loss leader" for advertising purposes.

opinions4u

cwcw wrote: »

That explains the general poor rates, but not specifically the really poor rates on internet based accounts, where surely the overheads for the bank are lower. Postal accounts involve postal charges both ways and admin handling, so I can't see why banks are seemingly trying to push customers (through higher rates) into these rather than online.

The average balance of a savings account is c£10k.

An extra 0.1% interest is £10. Two stamps cost 70p. Internet customers are more likely to be unprofitable rate tarts.

Truepat

Maybe it is a case of all the regulation that has been forced upon banks.
Maybe it is a case of them getting their money back from all the endowment, mis-selling, PPI claims against them.
Maybe they are trying to maintain shareholder interest.
Maybe it is a case of supply and demand.
Maybe it is a case of funding bonuses.
Maybe it is a combination of a lot of things.

Who knows but you are right the rates are pathetic.

Mr_K

'simplifying' - alarms bells should ring if your ever hear any company mentioning that word.

Whether its savings accounts or rail fares - it always means a slashing rates or increasing prices but trying to hide the fact - even worse pretending 'simplifying' is for your benefit ! The hope is that most won't look into the small print behind the 'simplifying' headline.
They are going to soon have to change the meaning of the word 'simplifying' in the dictionary.

As for the ISA, we're all in the same boat. The Govt. don't give a stuff about savers. Options are to switch for a very slightly better rate. Hold on in the knowledge that the money will remain tax free in the future when rates hopefully increase, swap to a stock shares isa - probably bigger returns but involves risk. I think the rugs goings to be pulled from ISA's very soon anyway on another attack on those who have selfishly saved. So another option is to spend it (which is what the Govt wants you to do).

Marmaduke123

Mr_K wrote: »

I think the rugs goings to be pulled from ISA's very soon anyway on another attack on those who have selfishly saved. So another option is to spend it (which is what the Govt wants you to do).

I hope you're not right about this, but I fear you may be.

cwcw

Rug being pulled? Do you know something I don't?

lisyloo

Definitely can't see ISA's being pulled before an election and even after would be very unpopular.
Much more likely to cut higher rate tax relief on pensions.