Are savings rates on their way down?

ruelle

Thought there'd be an increase after the last BoE hike but it looks like savings rates might be decreasing. Is now the time to lock in those fixes? 

Millyonare

They appear (for now) to have peaked around 5%

cricidmuslibale

ruelle said:

Thought there'd be an increase after the last BoE hike but it looks like savings rates might be decreasing. Is now the time to lock in those fixes? 

I'm not sure that easy access savings rates are clearly decreasing significantly at the moment but they are certainly levelling off at best right now. I too thought there'd be a general savings rate increase after the last B of E base rate rise but so far it appears I was mistaken.

However, some leading savings providers such as Coventry Building Society and Yorkshire Building Society have already stated that there will be interest rate increases across the board for their variable rate savings accounts in early December so all is not lost so to speak. Unfortunately, in most cases these forthcoming interest rate increases will be less than the 0.75% base rate rise, and in some cases these rates will be increasing by less than half of 0.75%!  So it's a mixed picture at best.

As for fixed interest rates, within the last fortnight they have in general reduced by c. 0.2% for periods of 2 to 5 years and by at least 0.25% for 1-year fixes. Whether this trend continues remains to be seen...

Johnjdc

The benchmark cost for the government to borrow for 2 years is down from a peak of 4.6% to around 3.15% now.

The cost for banks to borrow from each other for 5 years is down from 4.6% a month ago (which was not the peak) to 3.8% now.

We can therefore expect savings rates to fall from their peak unless something else happens, yes. The Bank of England's moves on the current rate might save instant access and notice accounts, or even push them up a bit, but fixes aren't likely to be going back above 5% any time soon.

Albermarle

I fixed one tranche yesterday at 4.75% for 3 years. Could have got 0.1% better, but it was easy to set up, as it with who I bank with ( Nationwide, who have got more competitive recently) 
I am thinking that in 18/24 months that will be quite a good rate, but who knows.

Also a similar discussion here.Saving rates — MoneySavingExpert Forum

dale_cotterill

Johnjdc said:

The benchmark cost for the government to borrow for 2 years is down from a peak of 4.6% to around 3.15% now.

The cost for banks to borrow from each other for 5 years is down from 4.6% a month ago (which was not the peak) to 3.8% now.

We can therefore expect savings rates to fall from their peak unless something else happens, yes. The Bank of England's moves on the current rate might save instant access and notice accounts, or even push them up a bit, but fixes aren't likely to be going back above 5% any time soon.

Fixes are past their peak, and will only be coming down. Especially ones over 18 months. I'd expect it would be highly unlikely you'd be able to get a 1 year rate anywhere near what you can now in a years time.

EthicsGradient

A week ago, Al Rayan offered me "loyalty" profit rates for fixed terms of:
1 year 4.68%
2 years 5.09%
3 years 5.19%
which would have been great, but that was 3 weeks after my previous fixed term deal with them had matured. They did say recent customers were included, but by the time they emailed me, I had put the money in other banks' 1 and 2 year bonds. But I do suspect these are roughly the peak rates, especially for the longer ones.

Linton

dale_cotterill said:

Johnjdc said:

The benchmark cost for the government to borrow for 2 years is down from a peak of 4.6% to around 3.15% now.

The cost for banks to borrow from each other for 5 years is down from 4.6% a month ago (which was not the peak) to 3.8% now.

We can therefore expect savings rates to fall from their peak unless something else happens, yes. The Bank of England's moves on the current rate might save instant access and notice accounts, or even push them up a bit, but fixes aren't likely to be going back above 5% any time soon.

Fixes are past their peak, and will only be coming down. Especially ones over 18 months. I'd expect it would be highly unlikely you'd be able to get a 1 year rate anywhere near what you can now in a years time.

Perhaps in the short term.  However rates are still lower than was normal pre 2008. Why wont they rise to those levels?

Johnjdc

Linton said:

dale_cotterill said:

Johnjdc said:

The benchmark cost for the government to borrow for 2 years is down from a peak of 4.6% to around 3.15% now.

The cost for banks to borrow from each other for 5 years is down from 4.6% a month ago (which was not the peak) to 3.8% now.

We can therefore expect savings rates to fall from their peak unless something else happens, yes. The Bank of England's moves on the current rate might save instant access and notice accounts, or even push them up a bit, but fixes aren't likely to be going back above 5% any time soon.

Fixes are past their peak, and will only be coming down. Especially ones over 18 months. I'd expect it would be highly unlikely you'd be able to get a 1 year rate anywhere near what you can now in a years time.

Perhaps in the short term.  However rates are still lower than was normal pre 2008. Why wont they rise to those levels?

Because between 2004 and 2007 the Bank of England rate was somewhere between 4.5% and 5.75% at any given time, with no particularly clarity about whether the next move would be up or down.

Now it is at 3% and there are already members of the Bank Committee in revolt at the prospect of it going any higher - and if it does, it's liable to come back down as inflation falls and the world goes into recession.

The economy - government, households, and companies, is in far more debt than it was in 2007, so those higher rates may simply not be possible.

Asghar

So it might not be a bad idea to open a Lloyds monthly saver, 4.50% fixed for the year with instant access.

Much more flexible than the Halifax offer where you have to close the account if you want to withdaw any money.

Patr100

We are now in a recession. Rates tend to be lower in a recession.
Central banks/Govt want to encourage spending and not saving in a recession .
Inflation will probably peak by the end of  this year. Further reducing the pressure on BoE to increase rates.
Yes mortgage rates are still low  historically but in terms of proportion of overall income they are higher than the 90s etc
so eg 5% mortgage rate is equivalent to more than double compared to past years in terms of affordability.
There will be huge pressure to protect mortgagers from further increases in the recession.
So the BoE rate may still rise slightly but may also plateau - don't see an actual reduction quite yet but year + longer term savings banks appear to have this baked in..