DF Capital 5.3% 90 day account - now open again!

CricketLady

I asked the question regarding rate drop notice through DF Capital's email address for queries and just received this:

"This is to confirm that if the interest rate was to be reduced on your 90 Day Notice Account, we would inform our customers 90 days ahead of the rate reduction being actioned.

Many thanks,
The Savings Team"

SnowMan

Looks like the DF Capital 90 day account has disappeared again for new applications

The notice account page of their website now says

We’ve had a fantastic response to our savings range and at the moment we are not offering new Notice accounts. However we do plan to launch new products soon, so please check back with us

They've now changed the documentation for the 90 day account for those who have already opened accounts to link to savings terms and conditions at September 2024 in a consistent way. 

However crucially it now links to a version named '204DFC0124 v11 (last updated September 2024)' which effectively says 90 days notice of an interest rate reduction only for the 90 day account. Whereas the version that was previously there until earlier today (?) was '204DFC0924 v12 (last updated September 2024)'. Section 26 of v12 which covered interest rate reductions to notice accounts effectively stated 104 days notice of an interest rate reduction for the 90 day account. I had previously downloaded v12 and this is the bit from section 26 of v12 where it said 104 days.

 

Note '204DFC0124 v11 (last updated September 2024)' is likely the same as '204DFC0124 v11 (last updated January 2024)' as only the update month seems to be different and the version name is the same. The 0124 at the end means January 2024. 

In summary '204DFC0124 v11 (last updated January 2024)' was replaced by  '204DFC0924 v12 (last updated September 2024)' which was then replaced by '204DFC0124 v11 (last updated September 2024)'

slinger2

Perhaps they pulled it before the MPC announcement, not wanting to pay 5.3% to new customers for the next 90/104 days.

Which reminds me, not funded mine yet.

SnowMan

slinger2 said:https://www.bankofengland.co.uk/statistics/yield-curves

Perhaps they pulled it before the MPC announcement, not wanting to pay 5.3% to new customers for the next 90/104 days.

Which reminds me, not funded mine yet.

Looking at if from their perspective it's not surprising at all that they've withdrawn the account. 

They are essentially committed to paying 5.3%pa for the next 90 days.Those with accounts already open can still pay money in; I can't see anything in the terms and conditions that means they can stop you doing that. With that also comes the additional selection risk that existing savers put more money in if earning 5.3%pa for 90 days suddenly looks more attractive.

There is an expectation that bank base rate may reduce by a basis point (0.25%) possibly around November and if this happens other savings rates will fall again and the rate DF are paying will be even more out of line.

The yield curve that measures expectations of future interest rates shows an expectation that interest rates will fall over the next few years by about 1%pa before starting to increase again.

Notice accounts can work quite well for savings institutions where savings rates are likely to increase in the short term future, because when base rate goes up they typically don't need to pass on the increase and savers can't get out without giving their required notice (e.g. 90 days). But they don't work so well for providers when savings rates start to fall. Where the terms and conditions allow the provider to cut the interest rate provided they allow the saver a notice free exit, or the rate can be automatically reduced with base rate falls, there is some protection to the provider against falls in general short term interest rates. But this isn't the case with the DF 90 day account. 

It is the savings that backs their commercial lending under their business model and obviously they don't want savers to suddenly and unexpectedly pull money out, which explains why they offer notice accounts. They offer fixed rate accounts but those accounts cause problems as batches of fixed term accounts mature at roughly the same time and they need to refinance to back their lending.  

So what will DF do going forward with the 90 day accounts? It's hard to say but we can perhaps expect them to give 90 days notice of an interest rate drop fairly soon. But when they do that will they suddenly get a flood of requests to withdraw in 90 days meaning they will need to refinance then. Of course some savers may realise they can put in a withdrawal request and then pay the withdrawal amount back into the account in about 90 days if the then reduced rate looks good then.

It's not surprising that we as savers are looking at the terms and conditions of these notice accounts and base rate trackers quite carefully to see what those terms allow the provider to do. Another DF term (section 9) says 'DF capital can close your account at any time in its absolute discretion. If we do so we will usually give you the greater of two months' notice or the period up to the maturity date'. Given there is no maturity date for notice accounts could they try and use this to close 90 day accounts with 2 months notice rather than 90 days?   

 

1spiral

SnowMan said:

slinger2 said:https://www.bankofengland.co.uk/statistics/yield-curves

Perhaps they pulled it before the MPC announcement, not wanting to pay 5.3% to new customers for the next 90/104 days.

Which reminds me, not funded mine yet.

Looking at if from their perspective it's not surprising at all that they've withdrawn the account. 

They are essentially committed to paying 5.3%pa for the next 90 days.Those with accounts already open can still pay money in; I can't see anything in the terms and conditions that means they can stop you doing that. With that also comes the additional selection risk that existing savers put more money in if earning 5.3%pa for 90 days suddenly looks more attractive.

There is an expectation that bank base rate may reduce by a basis point (0.25%) possibly around November and if this happens other savings rates will fall again and the rate DF are paying will be even more out of line.

The yield curve that measures expectations of future interest rates shows an expectation that interest rates will fall over the next few years by about 1%pa before starting to increase again.

Notice accounts can work quite well for savings institutions where savings rates are likely to increase in the short term future, because when base rate goes up they typically don't need to pass on the increase and savers can't get out without giving their required notice (e.g. 90 days). But they don't work so well for providers when savings rates start to fall. Where the terms and conditions allow the provider to cut the interest rate provided they allow the saver a notice free exit, or the rate can be automatically reduced with base rate falls, there is some protection to the provider against falls in general short term interest rates. But this isn't the case with the DF 90 day account. 

It is the savings that backs their commercial lending under their business model and obviously they don't want savers to suddenly and unexpectedly pull money out, which explains why they offer notice accounts. They offer fixed rate accounts but those accounts cause problems as batches of fixed term accounts mature at roughly the same time and they need to refinance to back their lending.  

So what will DF do going forward with the 90 day accounts? It's hard to say but we can perhaps expect them to give 90 days notice of an interest rate drop fairly soon. But when they do that will they suddenly get a flood of requests to withdraw in 90 days meaning they will need to refinance then. Of course some savers may realise they can put in a withdrawal request and then pay the withdrawal amount back into the account in about 90 days if the then reduced rate looks good then.

It's not surprising that we as savers are looking at the terms and conditions of these notice accounts and base rate trackers quite carefully to see what those terms allow the provider to do. Another DF term (section 9) says 'DF capital can close your account at any time in its absolute discretion. If we do so we will usually give you the greater of two months' notice or the period up to the maturity date'. Given there is no maturity date for notice accounts could they try and use this to close 90 day accounts with 2 months notice rather than 90 days?   

 

They have a get out clause in their T&Cs which may prevent you returning the funds by stating:

"Once you have given us an instruction to make a transfer from your Notice Account, or to close it, we will treat any subsequent instruction to cancel the transfer or the closure of the account as an application for a new Notice Account; however, we cannot guarantee that the same rate of interest will apply to this new account."

Not sure how this plays out when they have no 90 day notice account to apply for.

SnowMan

1spiral said:

SnowMan said:

slinger2 said:https://www.bankofengland.co.uk/statistics/yield-curves

Perhaps they pulled it before the MPC announcement, not wanting to pay 5.3% to new customers for the next 90/104 days.

Which reminds me, not funded mine yet.

Looking at if from their perspective it's not surprising at all that they've withdrawn the account. 

They are essentially committed to paying 5.3%pa for the next 90 days.Those with accounts already open can still pay money in; I can't see anything in the terms and conditions that means they can stop you doing that. With that also comes the additional selection risk that existing savers put more money in if earning 5.3%pa for 90 days suddenly looks more attractive.

There is an expectation that bank base rate may reduce by a basis point (0.25%) possibly around November and if this happens other savings rates will fall again and the rate DF are paying will be even more out of line.

The yield curve that measures expectations of future interest rates shows an expectation that interest rates will fall over the next few years by about 1%pa before starting to increase again.

Notice accounts can work quite well for savings institutions where savings rates are likely to increase in the short term future, because when base rate goes up they typically don't need to pass on the increase and savers can't get out without giving their required notice (e.g. 90 days). But they don't work so well for providers when savings rates start to fall. Where the terms and conditions allow the provider to cut the interest rate provided they allow the saver a notice free exit, or the rate can be automatically reduced with base rate falls, there is some protection to the provider against falls in general short term interest rates. But this isn't the case with the DF 90 day account. 

It is the savings that backs their commercial lending under their business model and obviously they don't want savers to suddenly and unexpectedly pull money out, which explains why they offer notice accounts. They offer fixed rate accounts but those accounts cause problems as batches of fixed term accounts mature at roughly the same time and they need to refinance to back their lending.  

So what will DF do going forward with the 90 day accounts? It's hard to say but we can perhaps expect them to give 90 days notice of an interest rate drop fairly soon. But when they do that will they suddenly get a flood of requests to withdraw in 90 days meaning they will need to refinance then. Of course some savers may realise they can put in a withdrawal request and then pay the withdrawal amount back into the account in about 90 days if the then reduced rate looks good then.

It's not surprising that we as savers are looking at the terms and conditions of these notice accounts and base rate trackers quite carefully to see what those terms allow the provider to do. Another DF term (section 9) says 'DF capital can close your account at any time in its absolute discretion. If we do so we will usually give you the greater of two months' notice or the period up to the maturity date'. Given there is no maturity date for notice accounts could they try and use this to close 90 day accounts with 2 months notice rather than 90 days?   

 

They have a get out clause in their T&Cs which may prevent you returning the funds by stating:

"Once you have given us an instruction to make a transfer from your Notice Account, or to close it, we will treat any subsequent instruction to cancel the transfer or the closure of the account as an application for a new Notice Account; however, we cannot guarantee that the same rate of interest will apply to this new account."

Not sure how this plays out when they have no 90 day notice account to apply for.

If say you've got 20K in the account and they tell you about a reduction in interest rate in say 90 days time. Then you could immediately put in a request for a say 19K withdrawal and immediately after the withdrawal has happened in 90 days you can make a deposit co-incidentally of 19K. So you aren't cancelling the transfer or cancelling the closure of the account, but you are positioning yourself back to the position as if the withdrawal hadn't happened. I can't see how they could use that term to stop you doing that. Note I can't see anything in the terms to stop you making further deposits.

SnowMan

DF Capital are reducing the interest rate on this 90 day Notice Account (issue 1) from 5.30% AER to 5.11% AER as from 23 February 2025.

See this post in the notice accounts thread.

SacredStephan

The DF Capital 90 Day Notice Account (Issue 4) is open at 5.11% AER.

T&Cs suggest that they will give 14+90 days notice of an interest rate reduction.

SnowMan

SacredStephan said:

The DF Capital 90 Day Notice Account (Issue 4) is open at 5.11% AER.

T&Cs suggest that they will give 14+90 days notice of an interest rate reduction.

There is a new version of the savings terms and conditions v14.6 (Nov 2024) and that now states that the notice is as you say 14+90 days.

The savings terms and conditions appear to apply to earlier issues also such as issue 3

If we make a change to your managed variable rate, and that change is to your disadvantage, we will:
a. advise you in advance of the change taking effect (in writing either by post or by email); and
b. provide you with a notice period of 14 days plus the standard notice period required for withdrawals on your
Notice Account before applying the new rate and remind you within 14 days of the change taking effect. E.g. if you
held a 90 Day Notice Account and we reduce the rate, we would provide you with 104 days’ notice prior to the rate
decrease.