UK Savings Account Interest Rates – January 2013 Update

Since 2009 UK savers have seen big falls in the interest rates being paid by the top savings accounts.  For a short time there was a little light at the end of the tunnel however this looks to have likely been removed with the Government / Bank of England’s introduction of the Funding for Lending Scheme (FLS).

Money Saving Expert tells us that if you are in the market for an easy access savings account you can get a savings interest rate of 2.35% AER.  Forget to switch at the end of 12 months to the bank offering the highest interest rate at that time and that becomes 1.35%.  Back in June 2012 you could get 3.2% AER variable with Santander reducing to 0.5% after 12 months.  That’s a fall of 0.85% in only 6 months.

If you choose to go for a no nonsense easy access savings account (always my preferred option), again using Money Saving Expert, that interest rate today is 2.3% AER with West Bromwich Building Society (as long you have a balance over £1,000 and only make 1 withdrawal a year).  Back in June 2012 the best rate was 2.75% AER variable with Aldermore (again, as long you had a balance over £1,000).  That’s a fall of 0.45% in 6 months.

Why do I think the Funding for lending Scheme has caused at least some, if not all of this?  Banks can now get cheap loans directly from the Bank of England to fund Business and Mortgage loans.  The more they borrow from the Bank of England they cheaper those loans become.  Why then borrow from the average punter.  They don’t need us anymore.  Well at least for the next 18 months. 

What’s worse is that the easy access savings accounts detailed above are the best accounts out there.  My chart today shows what is happening to the average account. 

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UK Mortgage Interest Rates – January 2013 Update

Analysis shows that today the purchase of a UK house through a mortgage is affordable however at the same time UK house prices are not good value.  This appears to be a surreal situation which is brought about by the abnormally low mortgage interest rates that are currently on offer today.  It is now my belief that we won’t see fairly valued housing in the UK until mortgages rates return to some semblance of normality.  With that in mind I’m starting a new dataset focused entirely on UK mortgage rates which will enable us to watch the mortgage market.  This might give us a heads up on what might be about to happen to house prices.

The Bank of England publishes a number of datasets on this topic and I have picked 5 which cover the more common mortgage types available today.  They are the sterling monthly mortgage interest rate of UK monetary financial institutions (excluding Central Bank) covering:

• Standard Variable Rate (SVR) mortgages
• Lifetime Tracker mortgages
• 2, 3 and 5 Year Fixed Rate Mortgages with a 75% loan to value ratio (LTV)

A history of these mortgage rates can be seen in the chart below.

 

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A zoomed version of this mortgage chart is shown below.  I’ve also placed the announcement dates of some of the well known market manipulations that have been undertaken by the UK Government and Bank of England which have helped keep rates mortgage rates low.  These include a Bank of England Bank Rate of 0.5%, 4 tranches of Quantitative Easing and the Funding for Lending Scheme (FLS).  So what is happening to mortgage rates?  Standard Variable and Lifetime Trackers are getting more expensive and are up 0.01% and 0.04% month on month respectively.  Year on year they are up 0.22% and 0.38%.

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