It’s safe to say it’s been a rough few months for banks when it comes to headlines – from unexplained current account closures to lackluster savings deals; pumped up mortgage rates to increase net interest profit margins.
Behind all this was a series of positive half-year results. Britain’s biggest banks aren’t doing that bad at all. The booming headlines don’t seem bad for business.
This week we’ve seen the Financial Conduct Authority growl and step up when it comes to savings rates.
It has devised a 14-point plan to prevent banks from skimming so much profit.
Bad Rates: The banks clearly don’t pay market leading savings rates – if that annoys you, move your money
Two of these include reviewing the timing of savings changes when there is a base interest rate change and publishing an analysis every six months of companies’ easily accessible savings rates, ranked from best to worst.
This is all well and good, but at the same time, bank customers are not forced to remain loyal.
We are in a more choice financial era – and one of the biggest examples of this is when it comes to our savings.
The truth is, I suspect, people like to have fairly bloated checking accounts (if they’re lucky enough to be in that position), because it just feels right, and like to keep pots of cash in the same bank. for convenience and safety.
If you’re happy with that, and happy to forgo better interest, that’s your prerogative. I don’t see how or why a bank would force you to move and be proactive.
There are plenty of challengers out there offering a much better deal on easy access rates, cash Isa’s, flat rates and everything else – but to attract money they need to have tabletop, best buy rates.
They do not have such an established name in the banking world.
For that reason, it is quite easy to see how banks are making more and more billions on net interest margin – the difference between savings interest rates and mortgage interest rates.
This week’s analysis from This is Money shows that the top five banks are on track to get nearly £40bn out of that margin again this year.
If that pisses you off, move your money.
Today, the Bank of England is expected to raise interest rates by another 0.25 percentage point to 5.25 percent.
This would be the highest level since February 2008 – an era synonymous with bank collapses and depositors being burned with smaller providers.
According to Moneycomms’ analysis, the best-buy easy-access savings rates are well below the previous time the base rate was 5.25 percent.
The top three deals were 6.5 percent, 6.4 percent and 6.31 percent. But the providers? Abbey National, Bradford & Bingley and Alliance & Leicester.
Today, Shawbrook Bank’s best rate comes in at 4.63 percent, about 1.87 percentage points below that.
And compared to some major banks, that rate is 5.5 percentage points higher than the paltry 1 percent that some still offer with old accounts.
Andrew Hagger, from Moneycomms, says: ‘Easily accessible savings rates have improved significantly following 13 consecutive base rate hikes; however, they are not at the level of 15 years ago.
“It was a different environment, with retail funds highly sought after in the run-up to the financial crisis.”
If you haven’t audited your accounts in some time, don’t be shocked if you find yourself in one of these terrible accounts – but again, you need to be proactive.
And while, when it comes to borrowing, mortgages have taken up many of the columns over the past year, other loan types have also seen big increases in debt service.
Take purchase credit cards, for example. According to Moneycomms, some banks have raised their rates by 85 percent since February 2008.
NatWest’s card then had a rate of 12.9 percent — that’s now an APR of 23.9 percent. Others highlighted in the survey include Barclaycard, up 67 percent from 14.9 percent to 24.9 percent.
Hagger adds: ‘Those with an average balance of £2,000 are now paying an extra £140 to £220 a year in interest charges.
“This isn’t a problem for those paying off their balances in full each month, but with an increasing number of people struggling to cope with living costs, these higher rates will rub salt in the wound.”
Don’t like what you just read? Move with your feet.
Happy with your bank and no matter they make huge profits. Stay seated.
It’s that simple.
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