Cascade Commentary

Savings rates continue to creep upwards year on year but slow as Brexit deadline looms

March 2019

Interest rates have increased for savers in year-on-year data, driven by both the rise in Bank Rate by the Bank of England accompanied with new market entries. Analysis however over the last three months has shown a slowdown for some terms for certain client types, aligned to the Bank of England’s decision to maintain Bank Rate at 0.75% amidst higher volatility in asset prices.

Personal savers in March 2018 were able to obtain 1.30% on Instant Access savings held with RCI Bank UK in their market-leading Freedom Savings account. The arrival of Goldman Sachs’ Marcus account offering 1.50% drove competition considerably upward. Today, Family Building Society top the charts with their 1.51% interest rate, edging ever so slightly above the 1.50% still being offered by Marcus.

Increases for Personal savers can also be seen in both notice and fixed term accounts. One year ago for example, Aldermore Bank topped the charts with its 30 day notice account paying 1.05%. Fast forward to today and its now offering 1.30%. Similarly for 2 year fixed term accounts, in March 2018 BLME topped the market with its 2.10% Premier Deposit Account. Today, Al Rayan Bank led the market paying 2.52% over a 24 month term.

Corporate and Charitable savers have also enjoyed increases to savings rates over the last twelve months, albeit not for market-leading Instant Access accounts which have remained at circa 1.00% over the period. Longer term rates have improved for Corporates and Charities, particularly over a 2 to 3 year time frame.

In March 2018, Al Rayan Bank paid Corporate and Charitable savers 2.02% in its 24 month fixed term account. Today, the same product now pays 2.42%. In addition, rates on offer for a 1 year fixed term have also increased by circa 0.30%, with Al Rayan Bank currently topping the market for Charities on 2.17% while BFC Bank (a new market entry) leads for Corporates paying 2.50% to SMEs.

Analysis between March 2019 and the start of the year has shown most rates being offered to be fairly consistent for all client types. 1 year and 2 year fixed term accounts have marginally moved by 0.05% to 0.10% while 5 year accounts have also been fairly flat over the last three months.

This slowdown is no doubt being driven by a “wait and see” approach in terms of the UK’s exit from the European Union. The Bank of England, in minutes released from their March meeting, has indicated that further tightening of monetary policy may be required in the scenario that a smooth and orderly exit occurs. Should this occur, savers can expect to enjoy further increases as Bank Rate drifts upwards. We do however move ever closer to the 29th March deadline, facing a third historic vote for Prime Minister May’s exit plan, with no consensus in parliament and so nothing can be taken for granted.

Do give us a call to discuss how to maximise your cash savings during these uncertain times.

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