3rd August 2015 by Anna Bowes
It’s no secret, the Funding for Lending Scheme, which came into operation in August 2012, has been devastating for savers. The scheme was launched with the intention of stimulating the housing market but its knock on effects meant that providers no longer looked to savers to fund their loan books and in fact retracted from the savings market. Best buy rates halved and existing savings rates tumbled, almost overnight.
Our Savings Champion Savings Index below highlights the dramatic effect on best buy rates, plummeting shortly after the scheme came into operation. To put things in context, the average of the top five easy access accounts was 3.15% at the start of August 2012, more than double today’s average of 1.48%.
The rates reduction stats below highlight the damaging effect the scheme has had on existing rates as well, hitting over 3,500 accounts to date and the number is still rising. Before Funding for Lending, interest rates being cut on existing accounts were almost unheard of outside of a base rate change. As you can see from the graph below, the cuts began shortly after Funding for Lending was introduced and show no sign of abating, with 211 accounts cut in July, which is third highest number of cuts in a month since the cull began.
Whilst the news for existing account holders remains bleak, there continues to be some positive movements amongst accounts available to open, with some of the best fixed rate bond and notice account rates we have seen in nearly two years. Easy access accounts have also improved, with a recent upturn in the Savings Champion Index, as a result of new best buys launched.
This week we have seen more of the same, with new market leading fixed rate bonds and a competitive notice account launched by Secure Trust Bank. We have also seen improved fixed rate ISAs from both Skipton Building Society (two and three years) and Shawbrook Bank (three years) which are now appearing in the top five ISAs for the respective terms.
Skipton Building Society and the Post Office have both improved their easy access offerings this week to a more competitive level, giving more evidence that we may be seeing an upturn in rates.