Rubbish savings rates

RG2015

TiVo_Lad said:

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 surprising 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.

Good points.

This also would explain why banks and building societies sometimes offer new accounts to existing customers only, which don't require ID and AML checks.

OldScientist

RG2015 said:

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.

I plotted the graph in an attempt to see whether there was a case to answer in the OP's original question... which it appears there wasn't since in the past (although not necessarily, dependent of age, the memorable past), sometimes the savings rate is higher than, sometimes lower than, and sometimes the same as the bank rate. However, there is some broad correlation between the two.

Is this information of any actionable use? Nope.
Was it a worthwhile use of about 30 minutes of my day? Of some marginal interest, but then I'm retired and it keeps the brain ticking over.

Now, where's that printer on button so I can print out the thread 

Borisjake

Mr._H_2 said:

subjecttocontract said:

I have to smile when the banks/ building societies send me out a customer satisfaction questionnaire. This usually includes a question along the lines of ' is there anything else the bank could do to improve customer satisfaction ?'........I usually answer Yes. Offer market leading savings interest rates instead of the uncompetitive rates currently on offer.

Then of course, there is the repeated email asking me to agree to go paperless. Why would I agree to go paperless ? It will no doubt improve the banks profitability but cost me more to personally print out their documents.......I'm not falling for that one without an incentive.

How often do you feel that it would be necessary to print the documents yourself, if you went paperless?

Exactly. I use paperless service, if I need to I'd save a copy to my hard drive, but why do that when I can see documents online? I call the bank maybe once or twice a year using skype, cheap as chips. And this particular bank branch I've never set foot in. Welcome to the 21st century.

subjecttocontract

Borisjake said:

Mr._H_2 said:

subjecttocontract said:

I have to smile when the banks/ building societies send me out a customer satisfaction questionnaire. This usually includes a question along the lines of ' is there anything else the bank could do to improve customer satisfaction ?'........I usually answer Yes. Offer market leading savings interest rates instead of the uncompetitive rates currently on offer.

Then of course, there is the repeated email asking me to agree to go paperless. Why would I agree to go paperless ? It will no doubt improve the banks profitability but cost me more to personally print out their documents.......I'm not falling for that one without an incentive.

How often do you feel that it would be necessary to print the documents yourself, if you went paperless?

Exactly. I use paperless service, if I need to I'd save a copy to my hard drive, but why do that when I can see documents online? I call the bank maybe once or twice a year using skype, cheap as chips. And this particular bank branch I've never set foot in. Welcome to the 21st century.

Yes I can see how you might think that because it suits you then it should suit everyone else. The world is not like that, it's diverse, we are all different.

RG2015

The following statement is on moneyhelper.org.uk

”If the BoE base rate rises you would expect to see the interest you earn from your savings to increase.”

Is this a valid expectation?

https://www.moneyhelper.org.uk/en/savings/how-to-save/interest-rates-explained

subjecttocontract

No..........

RG2015

subjecttocontract said:

No..........

This was just one of many references online to this supposed link between the BoE rate and the rate that savers get.

Banks and building societies don't help by instantly raising loan and mortgage rates when the BoE rate rises. Strangely they very rarely (if ever) instantly raise savings rates at the same time.

They even put messages on their websites and emails that following the BoE rate changes they are reviewing all of their rates.

I take a more pragmatic view. Banks may raise savings rates following a BoE rate increase but it is more of a marketing strategy to gain an advantage over the competition. This creates an apparent link that in truth is rather tenuous but nevertheless is perpetuated by mainstream and social media.

As to whether savings rates are rubbish at the moment is a subjective judgement. That they are well below inflation is without question. A more valid historical comparison is between inflation and savings rates.

I suspect that the gap between inflation and savings rates is at its highest level for quite a while.

Johnjdc

RG2015 said:

The following statement is on moneyhelper.org.uk

”If the BoE base rate rises you would expect to see the interest you earn from your savings to increase.”

Is this a valid expectation?

https://www.moneyhelper.org.uk/en/savings/how-to-save/interest-rates-explained

Ish, for instant/easy access.

Absolutely not for fixed rates - the longer the fix, the less true.

dale_cotterill

RG2015 said:

subjecttocontract said:

No..........

This was just one of many references online to this supposed link between the BoE rate and the rate that savers get.

Banks and building societies don't help by instantly raising loan and mortgage rates when the BoE rate rises. Strangely they very rarely (if ever) instantly raise savings rates at the same time.

They even put messages on their websites and emails that following the BoE rate changes they are reviewing all of their rates.

I take a more pragmatic view. Banks may raise savings rates following a BoE rate increase but it is more of a marketing strategy to gain an advantage over the competition. This creates an apparent link that in truth is rather tenuous but nevertheless is perpetuated by mainstream and social media.

Banks earn interest on deposits at the BoE at base rate, and also tie their fixed term assets and liabilities back to what is effectively base rate. A massive over-simplification, but base rate is central to savings rates, not tenuous.

RG2015

dale_cotterill said:

RG2015 said:

subjecttocontract said:

No..........

This was just one of many references online to this supposed link between the BoE rate and the rate that savers get.

Banks and building societies don't help by instantly raising loan and mortgage rates when the BoE rate rises. Strangely they very rarely (if ever) instantly raise savings rates at the same time.

They even put messages on their websites and emails that following the BoE rate changes they are reviewing all of their rates.

I take a more pragmatic view. Banks may raise savings rates following a BoE rate increase but it is more of a marketing strategy to gain an advantage over the competition. This creates an apparent link that in truth is rather tenuous but nevertheless is perpetuated by mainstream and social media.

Banks earn interest on deposits at the BoE at base rate, and also tie their fixed term assets and liabilities back to what is effectively base rate. A massive over-simplification, but base rate is central to savings rates, not tenuous.

Can you explain your metric that is effectively base rate please?

It is either base rate or not base rate.

Second, if base rate is central to savings rates, why are there currently no easy access accounts anywhere near 3% when a few months ago there were many way above base rate?