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Sadly, we need the banks more than they need us
Originally posted by 5corpio
We are all more aware than ever before that we need to find the best home for our money.
A lethal combination of low interest rates and high inflation means that, unless we have been very lucky, or very savvy, what we have in our savings accounts is worth less and less every month.
Fixed rate bonds - which typically give you better rates because you are giving the bank or building society your money for longer - usually offer the best deals for those who have exhausted their tax-free ISA allowance, which is why they are proving so popular. But this situation has existed for several years now, so why has the amount of time that the products remain on the market become so much shorter?
According to Moneyfacts, the average time a bond was available for was 131 days a six months ago, an 132 days five years ago. The 37 day average at present represents a massive drop, and it is all to do with how much the banks need you. When the credit crunch hit, fixed-term bonds were a really important source of income for struggling banks. They needed to get money from somewhere, and it was expensive to get in the wholesale money markets. Customers like you and me were handy cash cows, hooked in by high fixed-term bond rates. The banks managed to get the cash they needed from a stable source, and you and I were rewarded by higher interest rates.
What has changed? Quite simply, it’s less expensive than it was to raise money in the money markets. The banks are using these to raise money, but they still want the publicity that comes with headline grabbing rates. So they are still launching attractive-sounding deals, but are less willing to lend large sums at these rates. That would explain the deal launched by Yorkshire Building Society and removed in just three days last week.
Once again, we need the
Read more on this story: Sadly, we need the banks more than they need us - Telegraph
A lethal combination of low interest rates and high inflation means that, unless we have been very lucky, or very savvy, what we have in our savings accounts is worth less and less every month.
Fixed rate bonds - which typically give you better rates because you are giving the bank or building society your money for longer - usually offer the best deals for those who have exhausted their tax-free ISA allowance, which is why they are proving so popular. But this situation has existed for several years now, so why has the amount of time that the products remain on the market become so much shorter?
According to Moneyfacts, the average time a bond was available for was 131 days a six months ago, an 132 days five years ago. The 37 day average at present represents a massive drop, and it is all to do with how much the banks need you. When the credit crunch hit, fixed-term bonds were a really important source of income for struggling banks. They needed to get money from somewhere, and it was expensive to get in the wholesale money markets. Customers like you and me were handy cash cows, hooked in by high fixed-term bond rates. The banks managed to get the cash they needed from a stable source, and you and I were rewarded by higher interest rates.
What has changed? Quite simply, it’s less expensive than it was to raise money in the money markets. The banks are using these to raise money, but they still want the publicity that comes with headline grabbing rates. So they are still launching attractive-sounding deals, but are less willing to lend large sums at these rates. That would explain the deal launched by Yorkshire Building Society and removed in just three days last week.
Once again, we need the
Read more on this story: Sadly, we need the banks more than they need us - Telegraph