Have UK savings rates peaked in Oct 2022?

masonic

GDB2222 said:

"If you take a more pessimistic view of inflation than the above, then you can buy individual index linked gilts and hold to maturity to receive a guaranteed slightly above inflation return."

I'll be looking at IL gilts, then. When I last looked, they were on a negative real rate of return, and I'm quite chuffed at the thought of a small positive return without risk, if held to maturity.

Given how much more expensive borrowing in the gilt markets has now become (leading to the reversal of those negative real returns), it makes it far more likely NS&I will offer index linked savings certificates again. Though those are linked to CPI now (I/L gilts have until 2030 before they change to CPI), they are a simpler product and will no doubt prove popular. Though the current turmoil at Westminster will delay any action.

ChilliBob

lohr500 said:

Despite that Telegraph article, I am still going to sit tight and see what impact the November BoE statement has on rates.
If rates have peaked right now, then it's my loss for delaying, but I still think we will see further increases in the short term.
I am only looking to place savings on a 1 or 2 year horizon.

I think I'm going to sit in the middle here. I'll open one fix (one or two year) and then wait and see what happens in a couple of weeks. 

Not opened any fixes for a long time - I have one maturing at end of Jan I think, for 1.35% lol

Albermarle

ChilliBob said:

lohr500 said:

Despite that Telegraph article, I am still going to sit tight and see what impact the November BoE statement has on rates.
If rates have peaked right now, then it's my loss for delaying, but I still think we will see further increases in the short term.
I am only looking to place savings on a 1 or 2 year horizon.

I think I'm going to sit in the middle here. I'll open one fix (one or two year) and then wait and see what happens in a couple of weeks. 

Not opened any fixes for a long time - I have one maturing at end of Jan I think, for 1.35% lol

If I was fixing for 3 years or more, I would do it not long after the next Bof E announcement.

cricidmuslibale

Easy access and relatively short term fixed rate accounts (for periods of up to 2 years) are very unlikely to peak until either towards the end of this year or close to the start of 2023 imo. (This allows for probably two B of E base rate rises, 0.75 % on November 3 and 0.50% on December 15.)

However I now have a strong feeling that longer term fixed rate accounts (3 years or more) may well peak either at the very end of this month or, more likely, within the first two weeks of November. (This is based on how I suspect the markets will react to the ever increasing likelihood of Rishi Sunak becoming prime minister alongside Jeremy Hunt as chancellor of the exchequer i.e. with a collective sigh of relief, at least in the short term.)

Smidster

It remains very likely that there are at least two more moves by BoE in the coming months so I would still expect some upward movement however I fear that the window of opportunity is going to be very narrow and we will soon be on the way down again and it is very depressing that the longer term position seems more likely to be going back to be in the lower end of the range rather than a more normal historical level. 

Frequentlyhere

Smidster said:

It remains very likely that there are at least two more moves by BoE in the coming months so I would still expect some upward movement however I fear that the window of opportunity is going to be very narrow and we will soon be on the way down again and it is very depressing that the longer term position seems more likely to be going back to be in the lower end of the range rather than a more normal historical level. 

My (possibly incorrect) assumption has always been that money markets work in a similar way to the stock market i.e. that anything that anyone knows is effectively already priced in.

Ed Conway (Sky) has been tweeting this morning saying that implied UK interest rates are now on the way down and are below 5% for next year.  

As there's presumably also a margin of profit to be made, if that situation persists then I wonder if we're already pretty much at the top for now? 4.5% for a 1 year fix and 4.75% for 2 is pretty good going against that yardstick.

There are also other factors such as competition for funds and just lags in products coming on the market, but all else being equal I suspect we're unlikely to see big gains from here just because the BoE is going to raise rates.

Bobziz

Frequentlyhere said:

Smidster said:

It remains very likely that there are at least two more moves by BoE in the coming months so I would still expect some upward movement however I fear that the window of opportunity is going to be very narrow and we will soon be on the way down again and it is very depressing that the longer term position seems more likely to be going back to be in the lower end of the range rather than a more normal historical level. 

My (possibly incorrect) assumption has always been that money markets work in a similar way to the stock market i.e. that anything that anyone knows is effectively already priced in.

Ed Conway (Sky) has been tweeting this morning saying that implied UK interest rates are now on the way down and are below 5% for next year.  

As there's presumably also a margin of profit to be made, if that situation persists then I wonder if we're already pretty much at the top for now? 4.5% for a 1 year fix and 4.75% for 2 is pretty good going against that yardstick.

There are also other factors such as competition for funds and just lags in products coming on the market, but all else being equal I suspect we're unlikely to see big gains from here just because the BoE is going to raise rates.

I'm inclined to agree. SWAP rates are coming down and the.manufacturing PMI came in a fair bit lower than expectations this morning. This combined with a period of political stability and grown up economic policy seems likely to reduce the need for the BoE to increase rates as much as previously predicted. 

Millyonare

Smidster said:

It remains very likely that there are at least two more moves by BoE in the coming months so I would still expect some upward movement however I fear that the window of opportunity is going to be very narrow and we will soon be on the way down again and it is very depressing that the longer term position seems more likely to be going back to be in the lower end of the range rather than a more normal historical level. 

Keep in mind that the world has changed dramatically this century.

China and India -- over 2 billion people -- have flooded the world with new cash (from debt), while the West has flooded the world with new cash (from printing).

By some measures, the world is sitting on $50-100 trillion of spare cash looking for a home.

Huge cash oversupply = lower rates.

shortseller09

Hopefully we'll see some savings providers increase their rates before Christmas, but it'll likely be January for most.

Why? Savings rates have been falling because the markets are predicting a lower peak for interest rates than the view three months ago. A rise of 50bp is irrelevant, it was expected to be 75bp several weeks ago.

ForumUser7

shortseller09 said:

Hopefully we'll see some savings providers increase their rates before Christmas, but it'll likely be January for most.

Why? Savings rates have been falling because the markets are predicting a lower peak for interest rates than the view three months ago. A rise of 50bp is irrelevant, it was expected to be 75bp several weeks ago.

You are right that fixed term rates are affected heavily by the lower peak prediction - I more meant variable rates - easy access and potentially regular savers. Coventry and Yorkshire BS have said they'll be increasing their rates - they are yet to confirm when and by how much though