Rubbish savings rates

Band7

RG2015 said:

Band7 said:

"Bank rate" is easy to define - BoE base rate.

But what is "savings rate"? The best instant access rate? The best average instant access rate? The average of a number of rates? ISA rates included (in which case, which ones)?

I think it is inferred from the OP's posts as the unrestricted instant access savings account rates.

I can see why regular savers are excluded as these are by their very nature restricted. Similarly with fixed rate, fixed term savers and these also tend to follow bonds rates rather than the BoE rate.

ISAs should match non ISAs but they tend to be bit lower. I think this is more down to demand and competition although there is the issue of the additional admin cost for the banks.

Very few instant access accounts match the BoE rate but in these unusual times there have always been a few that are there or thereabouts. Right now though there are none, which is the point the OP is making.

The best current rate for new customers is Atom at 2.55% albeit with a limit of £100k

Including lower limits there is Barclays at 5% for up to £5k and the Virgin Money ISA at 3% within the ISA limits of £20k per annum.

I am not talking about the OP's definition but about the definition used in the graph. Though you are probably right, it's probably instant access with no limit, or very high limit, such as a million or two. 

People in the know wouldn't keep massive sums in instant access for any length of time. From that point of view alone, it's rather academic to compare BoE and savings rates.

RG2015

Band7 said:

RG2015 said:

Band7 said:

"Bank rate" is easy to define - BoE base rate.

But what is "savings rate"? The best instant access rate? The best average instant access rate? The average of a number of rates? ISA rates included (in which case, which ones)?

I think it is inferred from the OP's posts as the unrestricted instant access savings account rates.

I can see why regular savers are excluded as these are by their very nature restricted. Similarly with fixed rate, fixed term savers and these also tend to follow bonds rates rather than the BoE rate.

ISAs should match non ISAs but they tend to be bit lower. I think this is more down to demand and competition although there is the issue of the additional admin cost for the banks.

Very few instant access accounts match the BoE rate but in these unusual times there have always been a few that are there or thereabouts. Right now though there are none, which is the point the OP is making.

The best current rate for new customers is Atom at 2.55% albeit with a limit of £100k

Including lower limits there is Barclays at 5% for up to £5k and the Virgin Money ISA at 3% within the ISA limits of £20k per annum.

I am not talking about the OP's definition but about the definition used in the graph. Though you are probably right, it's probably instant access with no limit, or very high limit, such as a million or two. 

People in the know wouldn't keep massive sums in instant access for any length of time. From that point of view alone, it's rather academic to compare BoE and savings rates.

Okay, I understand. 

To be fair I haven't been following the Swallowpark thing, as I have no interest in the relationship between the BoE rate and "savings rates". In my mind it is more of a casual correlation which does not inform or influence any of my decision making.

To that end it is a bit of a distraction for me, although not as off topic as the bizarre introduction of the paperless / printed statement deviation.

wmb194

RG2015 said:

Band7 said:

RG2015 said:

Band7 said:

"Bank rate" is easy to define - BoE base rate.

But what is "savings rate"? The best instant access rate? The best average instant access rate? The average of a number of rates? ISA rates included (in which case, which ones)?

I think it is inferred from the OP's posts as the unrestricted instant access savings account rates.

I can see why regular savers are excluded as these are by their very nature restricted. Similarly with fixed rate, fixed term savers and these also tend to follow bonds rates rather than the BoE rate.

ISAs should match non ISAs but they tend to be bit lower. I think this is more down to demand and competition although there is the issue of the additional admin cost for the banks.

Very few instant access accounts match the BoE rate but in these unusual times there have always been a few that are there or thereabouts. Right now though there are none, which is the point the OP is making.

The best current rate for new customers is Atom at 2.55% albeit with a limit of £100k

Including lower limits there is Barclays at 5% for up to £5k and the Virgin Money ISA at 3% within the ISA limits of £20k per annum.

I am not talking about the OP's definition but about the definition used in the graph. Though you are probably right, it's probably instant access with no limit, or very high limit, such as a million or two. 

People in the know wouldn't keep massive sums in instant access for any length of time. From that point of view alone, it's rather academic to compare BoE and savings rates.

Okay, I understand. 

To be fair I haven't been following the Swallowpark thing, as I have no interest in the relationship between the BoE rate and "savings rates". In my mind it is more of a casual correlation which does not inform or influence any of my decision making.

To that end it is a bit of a distraction although not as off topic as the bizarre introduction of the paperless / printed statement deviation.

It's not a distraction. It was an attempt to test the OP's assertion that [instant access] deposit rates always used to be above Bank rate.

RG2015

wmb194 said:

RG2015 said:

Band7 said:

RG2015 said:

Band7 said:

"Bank rate" is easy to define - BoE base rate.

But what is "savings rate"? The best instant access rate? The best average instant access rate? The average of a number of rates? ISA rates included (in which case, which ones)?

I think it is inferred from the OP's posts as the unrestricted instant access savings account rates.

I can see why regular savers are excluded as these are by their very nature restricted. Similarly with fixed rate, fixed term savers and these also tend to follow bonds rates rather than the BoE rate.

ISAs should match non ISAs but they tend to be bit lower. I think this is more down to demand and competition although there is the issue of the additional admin cost for the banks.

Very few instant access accounts match the BoE rate but in these unusual times there have always been a few that are there or thereabouts. Right now though there are none, which is the point the OP is making.

The best current rate for new customers is Atom at 2.55% albeit with a limit of £100k

Including lower limits there is Barclays at 5% for up to £5k and the Virgin Money ISA at 3% within the ISA limits of £20k per annum.

I am not talking about the OP's definition but about the definition used in the graph. Though you are probably right, it's probably instant access with no limit, or very high limit, such as a million or two. 

People in the know wouldn't keep massive sums in instant access for any length of time. From that point of view alone, it's rather academic to compare BoE and savings rates.

Okay, I understand. 

To be fair I haven't been following the Swallowpark thing, as I have no interest in the relationship between the BoE rate and "savings rates". In my mind it is more of a casual correlation which does not inform or influence any of my decision making.

To that end it is a bit of a distraction although not as off topic as the bizarre introduction of the paperless / printed statement deviation.

It's not a distraction. It was an attempt to test the OP's assertion that [instant access] deposit rates always used to be above Bank rate.

Sorry, I edited my post to say it was a distraction for me.

eskbanker

OldScientist said:

Band7 said:

"Bank rate" is easy to define - BoE base rate.

But what is "savings rate"? The best instant access rate? The best average instant access rate? The average of a number of rates? ISA rates included (in which case, which ones)?

My recollection (which could be wrong) is that the swanlowpark values are an average of a selection of instant access rates - I do not have a note of the exact ones they used (but once the site is secure again, they do list them in detail). Over the last 15 years or so (since 2004), the swanlowpark values have, on average, been about 35 basis points below the best easy access rate as indicated in Martin's newsletters (the worst discrepancy, 2010, is about 1 percentage point), so I think they are probably representative enough.

There are other sources of historical savings interest rates, e.g. the Building Societies Association at https://www.bsa.org.uk/statistics/savings. However, since these are for bank and building society accounts, they tend to be a lot lower than the swanlowpark or recent MSE best rates.

I lived dangerously and accessed the https://www.swanlowpark.co.uk/savings-interest-data, which explains their data sources to be mostly (but not exclusively) easy access ISAs since 2010, with some limited access ones thrown in:

• January 2020: Yorkshire BS Limited Access Saver ISA. Apr 2020: Tesco Bank, Skipton BS follows BOE base rate to 0.1% on 19.03.2020. May 2020: AA Easy Access. Jun 2020 onwards: Nationwide Triple Access ISA. July 2021: Nationwide Triple Access Online Saver (not ISA). BOE base rate to 0.25% on 16.12.2021. BOE base rate to 0.5% on 03.02.2022. BOE base rate to 0.75% on 17.03.2022. Apr 2022: Nationwide 1 Year Triple Access Online Saver and Online ISA. BOE base rate to 1.0% on 05.05.2022.
• January 2019: Tesco Bank. May 2019: Sainsbury Bank Cash ISA. Dec 2019: Yorkshire BS Limited Access Saver ISA.
• January 2018: Virgin Money Easy Access e-ISA and cash-ISA, Tesco Bank and others. July 2018: Virgin Money Easy Access, NS&I Direct ISA. August 2018:Tesco Bank instant access, follows Bank-of-England base rate rise from 0.5% to 0.75%.
• February 2017: Nationwide Instant ISA saver. March 2017: Coventry Building Society Easy Access ISA[5]/[6] allows ISA-transfers-in.
• May 2017: Virgin Money Defined Access e-ISA issue 12, June: issue 13. August 2017: Leeds Building Society Limited Issue Online Access ISA. December 2017: Tesco Bank, NS&I.
• April 2016: First Direct Cash ISA, allows ISA transfers-in, need to open a First Direct bank account.
• First Direct was one of the last providers to cut rates after base rate cut in August 2016.
• May 2015 to March 2016: Nationwide Instant ISA saver.
• July 2014 to April 2015: GE Saver cash ISA from GE Capital Direct, internet-only, allows transfers-in.
• 2010 to June 2014: rate for instant-access internet ISA-account which allows ISA-transfers-in, from Nationwide and called e-ISA/Online ISA/Web ISA/Instant ISA Saver.
• 2003 to 2009: rates for a Nationwide e-savings account.
• 1987 to 2002 quarterly average gross rate for a building society share account as collected by the Buiding Societies Association.
• November 1984 to end 1986: the large building societies were no longer constrained by the Building Societies Association and rates published were 'predominant' rates collected by the association. Rates for last half of 1986 come from monthly rates published by the association but no longer shown in the Yearbook.
• 1980 to October 1984 gross interest rate for a building society share account as recommended by the Council of the Buiding Societies Association. Recorded in Building Societies Association Yearbook available from the publications section of their website www.bsa.org.uk. In the 1960s and 1970s building society rate changes were a big deal and were reported in the news, probably more for their impact on mortgage payments than savings rates.

RG2015

I may be digging myself into a hole but I don't like leaving things unfinished. (It has often got me into trouble, but I am too old to change the habit of a lifetime).

It may seem odd to say an analysis of the relationship between savings rates and the BoE rate is a distraction for me on a thread about this very topic.

However, I find the detailed graphical analysis of a correlation which in my mind does not exist, has no interest for me.

I just look at the big picture, which is that at the moment easy access rates are well below the BoE rate because that suits the banks' business plans.

eskbanker

RG2015 said:

I just look at the big picture, which is that at the moment easy access rates are well below the BoE rate because that suits the banks' business plans.

With all due respect, most would see the big picture (in the context of this thread) as being the relationship* between savings interest and base rate over time, and the current figures represent just a snapshot of that!

*Edit: not implying any actual relationship or correlation as such here, maybe 'comparison' might be a better word....

RG2015

eskbanker said:

RG2015 said:

I just look at the big picture, which is that at the moment easy access rates are well below the BoE rate because that suits the banks' business plans.

With all due respect, most would see the big picture (in the context of this thread) as being the relationship* between savings interest and base rate over time, and the current figures represent just a snapshot of that!

*Edit: not implying any actual relationship or correlation as such here, maybe 'comparison' might be a better word....

Perhaps there are two big pictures. Who knows what was in the OP’s mind.

1) I don't remember a time when savings interest rates were actually below the BoE interest rate.

2) Why is this happening?

One thing for sure is the absence of any images of paperless / posted bank statements. 

subjecttocontract

Albermarle said:

subjecttocontract said:

Paper isn't a complete waste.
* You can often use the other side of the document if you don't need it.
* It can be burnt to provide heat.
* Has numerous secondary applications.
* Helps keeps the refuse collection industry gainfully employed.
Etc, etc.

It is not just the paper though.
The printing ink, energy needed to put the document in an envelope, package it up with others, drive it to Post centre, transport it to relevant part of the country, sort it, deliver it, recycle it maybe etc etc.

I agree but let's not forget that lot creates business, jobs, tax revenue etc etc. So it's not all waste, there are lots of positives for those who are involved.

TiVo_Lad

My tuppence-worth on the "why this is happening" question.

Financial institutions need to spread risk so that they're not over-exposed to certain types of funding. We saw previously what happened when everyone became over dependent on the so-called "wholesale funding" from the money markets. So they want to attract funds from a variety of sources; consumer savings being just one of them.

The trouble with consumer savings is that they're notoriously expensive to administer; all the identity and anti-fraud checks, opening accounts, passwords, call centres etc cost money and that cost is reflected in the price (aka the interest rate) that financial institutions are prepared to pay for consumer cash. So it's not surprisng that we see consumer rates below the base rate; the BoE is, after all, the lender of last resort, so if you can get your funding elsewhere for a lower price, why wouldn't you? The administration cost is the same reason why ISA rates tend to be lower than non-ISA rates; there's just more admin involved.

Add this up and consumers will generally find themsleves at the back of the queue when it comes to rates; those institutions that are offering higher rates have either found they can't get access to cash at a lower rate elsewhere, they find they're over-exposed to one form of funding and need to address it, or maybe they even like the PR of being top of the best buy tables. Some can also afford to offer higher rates because they sell on the money to higher risk customers such as small businesses, buy-to-let landlords etc.