Cascade Commentary

Savings rates increase after base rate hike but not all providers are passing on gains

Our third quarter analysis of the UK savings market has shown interest rate gains for all client types in September, when compared with the last three months and since the start of the year.

Personal and non-personal savers have all enjoyed interest rate increases over the last three months and since the start of the year, with some interest rates 0.75% higher than the start of the year. The market leading rates for Personal savers have all increased since the start of the year with the best instant access rate now available with Coventry BS, earning savers 1.40% Gross/AER.

Rates are also higher on instant access for those first-time buyers saving for a new home. Holmesdale BS presently pay 2.25% Gross/AER for balances up to £50k to genuine first time buyers holding Holmesdale Young Saver account. Near-term rates have increased at the top of the market for personal savers who can now earn 1.77% expected profit on a 90 day notice with Gatehouse Bank (formerly Milestone Savings), up from 1.70% Gross/AER in June and 1.50% Gross/AER since January.

While the increases to fixed-term rates have not been as high, there have still been positive gains with 5 year fixed rate bonds reaching 2.70% Gross/AER for personal savers, representing an increase of 0.15% since the start of 2018. It is not just Personal savers, however, who are benefitting from the increase in interest rates with both Charity and Corporates enjoying gains in the aftermath of the rate hikes in November 2017 and August 2018.

Near-term rates have not moved greatly with Charity clients earning up to 1.00% Gross/AER on Instant Access with Aldermore Bank, significantly higher than the 0.06% Gross/AER on offer from the Top 4 providers (namely RBS, Barclays, Lloyds and HSBC). In contrast, longer term rates have increased by 0.55%, with charities able to earn 2.75% Gross/AER on a 5 Year Fixed Term with Cambridge & Counties Bank.

Corporates have also enjoyed similar gains with rates increasing the most by 0.60% on a 30 day term for deposits of £500k and more. Market leading rates for corporates on a 1 year term are 1.85% Gross/AER and slightly higher at 2.00% Gross/AER on a 2 year term.

Some providers have been criticised for not passing on gains and this is true for NS&I Income Bonds. Formerly 1.25%, NS&I dropped the rate to 1.00% Gross/AER following the emergency rate cut after the vote to leave the European Union. Since then, NS&I have maintained the rate at 1.00% Gross/AER despite two rate increases. The rate is now due to increase to 1.16% Gross/AER from 01 October 2018 but this remains lower than the 0.50% base rate increase.

We'll be keeping our clients updated should their portfolios show any better rate opportunities and do give us a call if you have any queries for how we can support your cash management needs on 0191 4813777 or email us at 

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