High rates for savers in the Credit crunch-true or false?

rainbowtrout

We all keep hearing that 'savers are getting a great deal' right now because of the credit crunch and banks needing to attract liquidity. Just wanted to know how many people finds this to be true. I personally think that just prior to the credit crunch (July/August last year) there were much better saving deals to be found, because of higher BoE base rates. Now despite the hype it's much more difficult to find a good rate with a relatively reputable bank, probably because they can't afford to give very much money away right now.
My own case below:

Six months ago BoE rates were at 5.75%. Many saving accounts could be found close to 7%, with reputable institutions such as Nationwide and Halifax (ok may be Halifax less reputable right now). 6month websaver from Halifax gave 6.8%.

Today a search on Moneysupermarket brings up very few saving accounts with high rates (except from maybe Dodgy-Nigerian-Banks-'R-Us). The highest one is again the six month saver from Halifax, at a much lower 6.5%.

If the media is trying to persuade me that savers don't get shafted either way they are not doing a very good job of it. You'd think with HBOS desperate enough to borrow money at 9% from the US Fed they'd be willing to offer a savings product at that price, they'd have people stampeding through their doors!

Your experiences/thoughts on this would be very much appreciated.

PBA

It's the rate relative to the base rate that's important, so getting say 6.25% now is better than getting 6.25% a year ago. At the moment you can get an instant access account paying 1.25% above the base rate. I don't think that's ever been possible before.

purch

You'd think with HBOS desperate enough to borrow money at 9% from the US Fed

:eek:

...did they ???

It's the rate relative to the base rate that's important, so getting say 6.25% now is better than getting 6.25% a year ago

:rotfl: Yeah Sure

Last year the 6 1/4 pct earned you £ 62.50 per £ 1,000 a year........now as if by magic 6 1/4 pct earns you .............. oops still the same £ 62.50 :rotfl: ........ which by the magic of inflation buy's you lots more...........errrrrrrr oh no make that much less :cool:

...what was that you were saying about 6 1/4 being better ???

RayWolfe

You are quite correct PBA. purch is failing to follow your logic.

Liz_the_Whizz

Though it's the gap between the net interest rate and inflation that is the real test of whether it's a boom time for savers.

With RPI unchanged in February at 4.1%, you need 5.15% gross to keep pace with inflation.

However, my current account tells me that 4.1% may not be altogether accurate;).

All the more reason to aim for 6%+ rather than languish @ 5%.

baby_boomer

Around six months ago the top fixed interest account was 7.05% from Stroud & Swindon.

Now it is 6.8% from Nottingham BS - 0.25% higher relative to base rates.

ManAtHome

And around a year ago, the best 1 year fixes were not much above 6%

bristolleedsfan

rainbowtrout wrote: »

We all keep hearing that 'savers are getting a great deal' right now because of the credit crunch and banks needing to attract liquidity. Just wanted to know how many people finds this to be true. I personally think that just prior to the credit crunch (July/August last year) there were much better saving deals to be found, because of higher BoE base rates. Now despite the hype it's much more difficult to find a good rate with a relatively reputable bank, probably because they can't afford to give very much money away right now.
My own case below:

Six months ago BoE rates were at 5.75%. Many saving accounts could be found close to 7%, with reputable institutions such as Nationwide and Halifax (ok may be Halifax less reputable right now). 6month websaver from Halifax gave 6.8%.


Your experiences/thoughts on this would be very much appreciated.

What savings rates do u believe that these smaller Building Societies should offer in order to have money to lend. :rotfl: :rotfl: :rotfl: After they pay top dollar for funds what sort of competitive morgage rates do u think they will be able to offer.

http://www.channel4.com/news/articles/business_money/lenders+withdraw+mortgages/1825247

rainbowtrout

Thanks all for your informative posts. Here is the link for HBOS borrowing from the US fed, which I should have linked to in my original post:

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3558310.ece

I did not realise that savings rates are at a historical high compared to the base rate so cheers for pointing that one out. However Purch also has a point that BoE didn't cut the base rate to bail out the savers and if you were a saver you would be better off six months ago in absolute terms.

jamesd

rainbowtrout, thanks for posting that link and confirming that your original claim that HBOS borrowed money from the US Fed was wrong. As the story says, HBOS raised the money by issuing structured corporate bonds and the markets were comfortable enough with HBOS to offer twice as much money as HBOS asked for.

You may have been confused by the mention of the opportunity of the Fed bailout deal. That made it possible for US banks to borrow money from the Fed to buy the HBOS bonds.

Meltdown_2

Despite rainbowtrout getting the source of the funding wrong, I don't think that the rest of the link seriously detracts from the essential argument he/she was making.

For example :

The interest HBOS is paying investors in the new bond is roughly 350 basis points higher than the rates it is charging mortgage customers.

Yeah, that makes sense! :rolleyes:

The fundraising move is designed to help maintain HBOS’s Tier 1 capital ratio at 7.7%.

The fundraising was more than two times oversubscribed, as investors scrambled to buy into the deal. UBS, BNP Paribas and Royal Bank of Scotland led the deal.

Banks buying into banks. Dominoes, anyone ...

One source close to the deal said: “Banks, by their very nature, have to finance themselves throughout an economic cycle."

Oh? Rather than relying on someone else to finance them?

"HBOS took the decision that it was better to raise capital while there was an opportunity than to wait for the credit crunch to end.”

That shows their confidence in the system. :rolleyes: