MSE News: First Direct doubles interest on regular saver to 7% – how to get the new rate

Snapdragon

ClaraSolis said:

I'm debating whether to open one or not. I recently switched to FD thinking I would open their 3.5% regular saver, but then Lloyds upped their interest to over 5% so I opened one with them. 

I have some savings in my Santander easy access account at 2.74% but I am a bit worried about basically locking away my money for a year on 2 regular saver accounts...

Is it likely we'll see any more rate increases on easy access accounts? Or an even better rate than 7% on a regular saver?

Whilst not an impossibility, given the potential for more BOE rate increases mid Dec, 7% is already significantly higher than any other regular saver and I doubt easy access will go anywhere near the rates of the regular savers. If concerned about having two regular savers consider the flexibility/rules of them before committing.

Although the First Direct one is locking away your money due to no withdrawals and the penalty if you close it, others are much more flexible. The Lloyds one you already have is basically easy access ( as many withdrawals without penalty as you like) so you can drip feed from the S123 saver to increase your overall rate, but withdraw from the Lloyds saver in the event you should need the money.

ClaraSolis

Snapdragon said:

ClaraSolis said:

I'm debating whether to open one or not. I recently switched to FD thinking I would open their 3.5% regular saver, but then Lloyds upped their interest to over 5% so I opened one with them. 

I have some savings in my Santander easy access account at 2.74% but I am a bit worried about basically locking away my money for a year on 2 regular saver accounts...

Is it likely we'll see any more rate increases on easy access accounts? Or an even better rate than 7% on a regular saver?

Whilst not an impossibility, given the potential for more BOE rate increases mid Dec, 7% is already significantly higher than any other regular saver and I doubt easy access will go anywhere near the rates of the regular savers. If concerned about having two regular savers consider the flexibility/rules of them before committing.

Although the First Direct one is locking away your money due to no withdrawals and the penalty if you close it, others are much more flexible. The Lloyds one you already have is basically easy access ( as many withdrawals without penalty as you like) so you can drip feed from the S123 saver to increase your overall rate, but withdraw from the Lloyds saver in the event you should need the money.

Thanks.
I was thinking of drip feeding into both the FD and the Lloyds one (I don't earn enough to pay the full amount in both regular savers anyway). Like you say, I could treat the Lloyds as an easy access in case I do need the money. And I'll treat the FD one as an account where my money will be locked away, so I won't withdraw from that one unless it's an emergency and the Lloyds one doesn't cover it.

I just want to try and maximize the interest I can get with the small amount of savings I own. 

Sensory

cricidmuslibale said:

ColdIron said:

ANGLICANPAT said:

Whats the formula please to work out  the average %  interest  per year with these savers  that restrict your pay in amount per month?

If you mean the amount of interest this gets you pretty close

Monthly amount * rate/100 * 6.5

E.g. 400 * 0.0525 * 6.5 = £136.50

If you really mean 'the average % interest  per year' then it's the advertised rate. E.g. if the advertised rate is 5.25% then the average % interest  per year is 5.25%

Monthly amount * rate / 100 * 6.5 slightly overestimates the total annual interest each time. Monthly amount * rate / 100 * 6.44 gives a slightly more accurate estimate, I think.

How did you arrive at 6.44?

The 6.5 figure is a simple approximation calculated via the following:

1. Divide the gross Interest Rate by 12, to approximate monthly interest = (R / 12)
2. Add together the monthly interest:
   • Month one = 1 deposit x (R / 12)
   • Month two = 2 deposits x (R / 12)
   • Month three = 3 deposits x (R / 12)
   • ...month twelve = 12 deposits x (R / 12)
   • = 78 monthly deposits x (R / 12)
3. = (78 x Monthly Amount x R) / 12
4. Simplify by dividing 78 by 12:
   • Monthly Amount x Interest Rate x 6.5
5. M x R x 6.5
6. 400 * 0.0525 * 6.5 = £136.50

When drip-feeding, the amount earning standard interest has 66 monthly amounts, simplifying to M x R x 5.5.
6.5 + 5.5 = 12 (like twelve whole months)

For more accuracy, accounting for the varying number of days in each calendar year and assuming deposits are made on the first of each calendar month, there are several methods of calculation depending on how a bank decides to round off fractional pennies.

• No rounding, except the final interest figure: £137.05 (137.0465753)
• Rounding the daily interest figure, then multiplying by the number of days until the next deposit: £137.41
• Rounding down the daily interest figure, then multiplying by the number of days until the next deposit: £135.60

jaypers

Easiest quick calculation if you’re going to pay an equal sum in over 12 months is to take 50% of the annual contribution and apply the interest rate. So (£300x12) / 12 = £1800@7% = £126. 

Yes I know it’s not exact but it’s about right and an easy mental calculation!

Albermarle

Albermarle said:

Bigwheels1111 said:

VXman said:

Is this available for all current FD customers?  I don't remember seeing a regular savers account available. Maybe I have just been remis. Can I open a new one on 1st Dec at 7%

Yes all FD account holders.
It might take 3-7 day to open.
It did in April I think it was when they launched the 3.5% regular saver this year.

Just opened this today as we have a joint current account. Worth noting that you can not open the regular saver ( and probably any other savings account) jointly, even if the linked current account is a joint one. 

To add to my original post. If you have a joint current account with FD, then you can both open a Regular Saver individually, just linked to the one joint current account.

RG2015

westv said:

cricidmuslibale said:

ColdIron said:

ANGLICANPAT said:

Whats the formula please to work out  the average %  interest  per year with these savers  that restrict your pay in amount per month?

If you mean the amount of interest this gets you pretty close

Monthly amount * rate/100 * 6.5

E.g. 400 * 0.0525 * 6.5 = £136.50

If you really mean 'the average % interest  per year' then it's the advertised rate. E.g. if the advertised rate is 5.25% then the average % interest  per year is 5.25%

ANGLICANPAT said:

Whats the formula please to work out  the average %  interest  per year with these savers  that restrict your pay in amount per month?

Monthly amount * rate / 100 * 6.5 slightly overestimates the total annual interest each time. Monthly amount * rate / 100 * 6.44 gives a slightly more accurate estimate, I think.

Am I the only one that has a % button on my calculator? 

If I need to calculate interest at, say 5.25%, I automatically put 0.0525 in my calculator.

Am I the only one to do this?

PS. I never use the % button on a calculator, although I quite like using the % function in an Excel formula.

cricidmuslibale

Sensory said:

cricidmuslibale said:

ColdIron said:

ANGLICANPAT said:

Whats the formula please to work out  the average %  interest  per year with these savers  that restrict your pay in amount per month?

If you mean the amount of interest this gets you pretty close

Monthly amount * rate/100 * 6.5

E.g. 400 * 0.0525 * 6.5 = £136.50

If you really mean 'the average % interest  per year' then it's the advertised rate. E.g. if the advertised rate is 5.25% then the average % interest  per year is 5.25%

Monthly amount * rate / 100 * 6.5 slightly overestimates the total annual interest each time. Monthly amount * rate / 100 * 6.44 gives a slightly more accurate estimate, I think.

How did you arrive at 6.44?

The 6.5 figure is a simple approximation calculated via the following:

1. Divide the gross Interest Rate by 12, to approximate monthly interest = (R / 12)
2. Add together the monthly interest:
   • Month one = 1 deposit x (R / 12)
   • Month two = 2 deposits x (R / 12)
   • Month three = 3 deposits x (R / 12)
   • ...month twelve = 12 deposits x (R / 12)
   • = 78 monthly deposits x (R / 12)
3. = (78 x Monthly Amount x R) / 12
4. Simplify by dividing 78 by 12:
   • Monthly Amount x Interest Rate x 6.5
5. M x R x 6.5
6. 400 * 0.0525 * 6.5 = £136.50

When drip-feeding, the amount earning standard interest has 66 monthly amounts, simplifying to M x R x 5.5.
6.5 + 5.5 = 12 (like twelve whole months)

For more accuracy, accounting for the varying number of days in each calendar year and assuming deposits are made on the first of each calendar month, there are several methods of calculation depending on how a bank decides to round off fractional pennies.

• No rounding, except the final interest figure: £137.05 (137.0465753)
• Rounding the daily interest figure, then multiplying by the number of days until the next deposit: £137.41
• Rounding down the daily interest figure, then multiplying by the number of days until the next deposit: £135.60

Whilst all that you’ve written above and the various calculations and amounts appear to be entirely logical and eminently sensible, I found through comparing my own calculations to the results produced by the MSE regular savings calculator that multiplying by 6.44 instead of 6.5 gives a final interest figure closest to that produced by the MSE calculator for quite a lot of different monthly deposit amounts and interest rates.

Why this is I’m not entirely sure, but it could have something to do with interest earned from deposits during the first few months having slightly more influence on the final interest total after 12 months than interest earned from deposits during the last few months, perhaps?

Sensory

cricidmuslibale said:

Whilst all that you’ve written above and the various calculations and amounts appear to be entirely logical and eminently sensible, I found through comparing my own calculations to the results produced by the MSE regular savings calculator that multiplying by 6.44 instead of 6.5 gives a final interest figure closest to that produced by the MSE calculator for quite a lot of different monthly deposit amounts and interest rates.

Why this is I’m not entirely sure, but it could have something to do with interest earned from deposits during the first few months having slightly more influence on the final interest total after 12 months than interest earned from deposits during the last few months, perhaps?

Earlier deposits accrue interest for longer yes, but that doesn't make a difference mathematically (unless compounding is involved). It's all accounted for in the 78-deposit calculation, where the first deposit generates interest 12 times, the second deposit 11 times, the third 10 times and so on, and the interest rate remains the same throughout.

The MSE calculator doesn't provide pence and is even more of an approximation than the calculations above. We don't know what assumptions it makes, but applying 6.44 to try and match its results isn't a consistent or accurate approach. For example, for £400 a month at 3% interest, the calculator results in £78, which happens to be exactly the same as 400 x 0.03 x 6.5 = 78. To arbitrarily multiply by 6.44 would result in 77.28. The multiplier of 6.5 is logically deduced with consistent assumptions (twelve periods exactly equal in length) and likely a more reliable estimate overall.

I had a Lloyds Monthly Saver (£400 per month at 3%) which matured with £81.24 interest according to my statement, starting from 11 April and maturing one year later. It's clear based on precise calculations, that Lloyds doesn't apply any rounding except on the final interest figure.

Deposit Date	Balance	Days	Daily Interest at 3.00%	Accrued Daily Interest	Relative of Total Interest
11/04/2018	400	20	0.032876712	0.657534247	0.81%
01/05/2018	800	31	0.065753425	2.038356164	2.51%
01/06/2018	1200	31	0.098630137	3.057534247	3.76%
02/07/2018	1600	30	0.131506849	3.945205479	4.86%
01/08/2018	2000	33	0.164383562	5.424657534	6.68%
03/09/2018	2400	28	0.197260274	5.523287671	6.80%
01/10/2018	2800	31	0.230136986	7.134246575	8.78%
01/11/2018	3200	32	0.263013699	8.416438356	10.36%
03/12/2018	3600	30	0.295890411	8.876712329	10.93%
02/01/2019	4000	30	0.328767123	9.863013699	12.14%
01/02/2019	4400	28	0.361643836	10.1260274	12.46%
01/03/2019	4800	41	0.394520548	16.17534247	19.91%
		365		81.23835616

pepsi_max2k

For anyone who’s opened one - how long did it take to be approved? I submitted yesterday and said it’d take up to 3 days, and currently there’s nothing showing at all on the app/website (not even an email/message to show I’ve applied 😐). 

Albermarle

pepsi_max2k said:

For anyone who’s opened one - how long did it take to be approved? I submitted yesterday and said it’d take up to 3 days, and currently there’s nothing showing at all on the app/website (not even an email/message to show I’ve applied 😐). 

I opened one on Wednesday and the first communication from FD was yesterday afternoon. A text saying that due to high demand, it is taking longer than usual longer than to open new accounts and they will message again when it is open.