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rantnrave

The Great Unmoving Savings Rates

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I check savings rates for easy access accounts several times a week. They were reasonably static (and cr*p) throughout most of the second half of 2013. Then news came that FLS for mortgages was being pulled. That announcement in itself didn't see rates change. In fact, the accounts offering the 'best' rates remained exactly the same over Christmas and into the new year. Now January is over, the FLS for mortgages is officially at an end - and it is still exactly the same accounts and same rates on offer as three months ago. Absolutely nothing has changed whatsoever. It's as if the list has been frozen in time and banks don't even bother to adapt these products any more... Have savings accounts and rates all been but forgotten by lenders as a source of attracting funds?

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I check savings rates for easy access accounts several times a week. They were reasonably static (and cr*p) throughout most of the second half of 2013. Then news came that FLS for mortgages was being pulled. That announcement in itself didn't see rates change. In fact, the accounts offering the 'best' rates remained exactly the same over Christmas and into the new year. Now January is over, the FLS for mortgages is officially at an end - and it is still exactly the same accounts and same rates on offer as three months ago. Absolutely nothing has changed whatsoever. It's as if the list has been frozen in time and banks don't even bother to adapt these products any more... Have savings accounts and rates all been but forgotten by lenders as a source of attracting funds?

Nothing is risk free any more.....people can't make money out of people who are not prepared to take risks with their money......nothing in it for them......buy a house, toss a coin, put it on black or hand it over to some nice person who will make it work for you. ;)

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Savers can manufacture interest by thrifting. Do what others do -public sector, companies in using this period to reduce debt on the balance sheet. In reality it is transferred to someone else. Though ultimately the past experience would suggest that the tax payer will be on the hook for this. However, they aren't raising taxes just 'cutting' spending but looking at the deficit no one is paying. Maybe the boe are paying?

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I check savings rates for easy access accounts several times a week. They were reasonably static (and cr*p) throughout most of the second half of 2013. Then news came that FLS for mortgages was being pulled. That announcement in itself didn't see rates change. In fact, the accounts offering the 'best' rates remained exactly the same over Christmas and into the new year. Now January is over, the FLS for mortgages is officially at an end - and it is still exactly the same accounts and same rates on offer as three months ago. Absolutely nothing has changed whatsoever. It's as if the list has been frozen in time and banks don't even bother to adapt these products any more... Have savings accounts and rates all been but forgotten by lenders as a source of attracting funds?

Banks don't need to attract funds! They generate deposits when they make loans, recording the two simultaneously on opposite sides of the balance sheet. Deposits are considered to be a liability of the bank, loans an asset. The thing they're short of is solvent borrowers.

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The banking sector as a whole does not need to attract savers and depositers (so it funds itself) but individual banks do need to attract savers and deposits.

Sure, when someone decides to take a loan the bank in question's balance sheet increases simultaneously on asset and liability sides but as soon as someone spends that loan (which I guess is the reason they took it out), barring the situation where the receiver of the payment banks at the same bank, the bank will need to fund (through borrowing or attracting deposits) the mismatch in assets and liabilities that creates.

As such the fiat system doesn't mean a bank doesn't need to fund loans, it just creates a system where the loan is funded when it is spent, which is actually pretty similar to funding it prior to loaning it. Merely a timing issue that gets settled on a daily basis.

Also, unless said loan recipients or the people they spend the loan with are pulling their funds out as cash, the funds will be in the banking system deposited somewhere.

Edited by terryturbojr

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Thanks. I had seen reference to that article on other threadsbut not read it. Insightful stuff.

The 3% deal I was getting has dropped to 2% at the start of this month. I'm offsetting that with a new role at work that has a 20% pay rise (I should add here that I'm not paid that much compared to others on this site, but have a wad of savings, so I'm slightly better off than i was last month). That latter savings amount now excludes us from Tax Credits. TPTB are trying to force me into buying an overpriced house. I aint budging until I see value.

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My savings are getting a rate of 5.4% on Zopa.

It cant be any lss safe than a bank.

Do us all a favour and join the p2p lending revolution

Zopa gos to show what the real interest rates should be and how much profit the bankers are taking from savers.

Edited by TheCountOfNowhere

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A bank deposit effectively risk free, when under the saving insurance threshold anyway, so the rate should be pretty close to the risk free rate ie what you get on equivalent government debt, so gilts. What is that these days, 0.5%?

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Also, unless said loan recipients or the people they spend the loan with are pulling their funds out as cash, the funds will be in the banking system deposited somewhere.

And therein lies the rub - ultimately they need to make provision for people who actually demand money instead of settling for bank credit. It's the ultimate 'safety brake' that keeps the system somewhat honest.

As long as people are happy to deal in bank credit, there's almost an unlimited amount of chicanery that can be employed to make the books look like they are balanced and keep people accepting the bank's credit. It would take a very severe incident such as a bank run which severely unbalances the books in sight of the public to upend the nice little system of smoke and mirrors that keeps any particular bank going.

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A bank deposit effectively risk free, when under the saving insurance threshold anyway, so the rate should be pretty close to the risk free rate ie what you get on equivalent government debt, so gilts. What is that these days, 0.5%?

The argument would be that the yeilds on Gilts are also artificially low.

Of course, it's the low yields that facilitate low interest rates. If you can lend to a sovereign government (the safest loan you can make) and get an X% return, why would you lend money to a bank or anyone else except for an amount in excess of X? Therefore keep the rate that governments pay low and you keep the rate that banks must pay, low too.

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And therein lies the rub - ultimately they need to make provision for people who actually demand money instead of settling for bank credit. It's the ultimate 'safety brake' that keeps the system somewhat honest.

As long as people are happy to deal in bank credit, there's almost an unlimited amount of chicanery that can be employed to make the books look like they are balanced and keep people accepting the bank's credit. It would take a very severe incident such as a bank run which severely unbalances the books in sight of the public to upend the nice little system of smoke and mirrors that keeps any particular bank going.

That's what bank reserves are for. At least you hope. In the event of a run they don't last long. Ultimately the central bank has to step forward as lender of last resort or risk a collapse.

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law of unintended consequences - it seems to me

savings rates are rubbish

so what do people who have a bit of ready cash and the pundits tell them they can get a 5% return by BTL - pile into property

so property prices go up because of demand and - there you have it we are all rich and the recession is over and we are all property millionaires.

of course the BTL wheeze is better than leaving your money in the bank - low rates of interest, tax relief, capital appreciation, exorbitant rents backed by HB - ££££££s all the way.

now none of this affects me directly - not enough savings to worry about the loss of a few %age points but it is grossly unfair to the younger generation who are being given the messy end of the stick whether they are trying to buy their own home or renting from the greedy BTL scum. and they are trying to save a deposit

rant over. :angry:

Edited by olliegog

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law of unintended consequences - it seems to me

savings rates are rubbish

so what do people who have a bit of ready cash and the pundits tell them they can get a 5% return by BTL - pile into property

so property prices go up because of demand and - there you have it we are all rich and the recession is over and we are all property millionaires.

of course the BTL wheeze is better than leaving your money in the bank - low rates of interest, tax relief, capital appreciation, exorbitant rents backed by HB - ££££££s all the way.

now none of this affects me directly - not enough savings to worry about the loss of a few %age points but it is grossly unfair to the younger generation who are being given the messy end of the stick whether they are trying to buy their own home or renting from the greedy BTL scum. and they are trying to save a deposit

rant over. :angry:

Pray tell how that is an unintended consequence...

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