Do Raisin Bank understand the difference between AER and Gross interest rate?

The headline AER figure and calculated interest for a 2 year fixed rate savings are displayed thus:

Which isn't my idea of AER.
When you drill into the "view details" they seem to get it right:


A little worrying that they can't get this right?


Comments

  • AmityNeon
    AmityNeon Posts: 891
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    It appears Raisin's approximations use the AER figure, even for accounts paying simple interest.
  • On-the-coast
    On-the-coast Posts: 381
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    edited 7 December 2023 at 8:33PM
    1.0525 compounded for two years = £107.8 of interest. (actually £107.75)
    1.0539 plain interest not compounded in second year = £53.9 of interest per year = £107.8
    I'm not sure i see the problem? as both methods give the same interest payable.

    BTW i think Raisin is Sharia banking? 
    Their website say they cant offer interest rates... specifically saying they don't offer AER's just expected profits - but then they go on to list a bunch of AER's against their sharia savings accounts.
    e.g. see here:
    https://www.raisin.co.uk/banking/al-rayan-faq/
    I guess that's because they have to offer equivalent AER by UK rules?
    But are they somehow doing it a little different?

  • AmityNeon
    AmityNeon Posts: 891
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    1.0525 compounded for two years = £107.8 of interest. (actually £107.75)
    1.0539 plain interest not compounded in second year = £53.9 of interest per year = £107.8
    I'm not sure i see the problem? as both methods give the same interest payable.

    The green "+ £105.00" approximation calculated on Raisin's web interface. Raisin uses the AER instead of gross, even for accounts paying simple interest.

    BTW i think Raisin is Sharia banking?

    Raisin is not a bank and doesn't offer any savings products directly. They're a 'savings marketplace' allowing customers to apply for and manage savings accounts from their 35+ partner banks via one single login.

  • grumbler
    grumbler Posts: 58,624
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    edited 7 December 2023 at 10:58PM
    AmityNeon said:

    1.0525 compounded for two years = £107.8 of interest. (actually £107.75)
    1.0539 plain interest not compounded in second year = £53.9 of interest per year = £107.8
    I'm not sure i see the problem? as both methods give the same interest payable.

    The green "+ £105.00" approximation calculated on Raisin's web interface. Raisin uses the AER instead of gross, even for accounts paying simple interest.


    I don't understand. If 'simple interest' means that they pay 2*5.39%=10.78% at the end of 2 years, this is exactly £107.80. And, recalculated to AER, this becomes 5.25%.

    We are born naked, wet and hungry...Then things get worse. :(

    .withdrawal, NOT withdrawel ..bear with me, NOT bare with me
    .definitely, NOT definately ......separate, NOT seperate
    should have, NOT should of
    .....guaranteed, NOT guarenteed
  • AmityNeon
    AmityNeon Posts: 891
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    edited 7 December 2023 at 11:07PM
    grumbler said:
    AmityNeon said:

    1.0525 compounded for two years = £107.8 of interest. (actually £107.75)
    1.0539 plain interest not compounded in second year = £53.9 of interest per year = £107.8
    I'm not sure i see the problem? as both methods give the same interest payable.

    The green "+ £105.00" approximation calculated on Raisin's web interface. Raisin uses the AER instead of gross, even for accounts paying simple interest.

    I don't understand. If 'simple interest' means that they pay 2*5.39%=10.78% at the end of 2 years, this is exactly £107.80. And, recalculated to AER, this becomes 5.25%.

    Indeed, the account pays simple interest at 5.39% gross, so how do you think Raisin is calculating +£105.00? It's not just this account either; Raisin appears to always calculate their interest approximations using the AER, but the AER is not a figure that should be used in calculating gross interest.

  • grumbler
    grumbler Posts: 58,624
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    Where do you see £105? I see £1,107.80, i.e. £107.80 interest, that corresponds to 5.39% gross and means 5.25% AER.




    We are born naked, wet and hungry...Then things get worse. :(

    .withdrawal, NOT withdrawel ..bear with me, NOT bare with me
    .definitely, NOT definately ......separate, NOT seperate
    should have, NOT should of
    .....guaranteed, NOT guarenteed
  • grumbler said:
    Where do you see £105? I see £1,107.80, i.e. £107.80 interest, that corresponds to 5.39% gross and means 5.25% AER.




    It's easy to miss - in the first picture, below "The headline AER figure and calculated interest for a 2 year fixed rate savings are displayed thus:", and between the FSCS and "view details" cells.
  • grumbler said:

    Where do you see £105? I see £1,107.80, i.e. £107.80 interest, that corresponds to 5.39% gross and means 5.25% AER.

    The whole point of this thread was to contrast Raisin's (dynamic) calculative error compared to the correct (static) information revealed when "View details" is clicked. £105.00 isn't @dalts99's idea of 5.25% AER, but £107.80 is.

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