Banks and mortgage companies that pay better rates to loyal savers
It’s a commonly pronounced truism in personal finance that loyalty doesn’t pay.
After years of complaints, the city regulator announced a fortnight ago proposals to crack down on the practice of insurance companies that profit from customer loyalty in the form of successively higher premiums.
And it is often the same in the world of savings. Savers who have been with their bank or mortgage company for a long time are often the first to pay the price of the cuts.
Loyalty often doesn’t pay for savers, but some banks reward existing customers
Suppliers take the knife for the rates paid on their old books knowing that very few people change.
Indeed, a 2018 study by the Financial Conduct Authority found that only one in ten savings account holders and Isas had changed in the past three years.
Meanwhile, accounts opened more than five years ago, representing 60 percent of the overall savings market, received 0.42 percentage point less interest than more recent savings accounts .
Loyalty therefore literally does not pay for savers in most cases.
But in a minority of situations, it is possible. While This is Money always recommends that readers shop using our best buy tables, in some cases sticking with a bank or building society can pay off.
Last week, Yorkshire Building Society, the third largest mutual in the country, announced plans to pay out £ 16million in the form of higher rates for loyal savers, in addition to a 20million boost. sterling announced in January.
That means a 0.2 percentage point top-up to many of its savings rates, with easy-to-access accounts and Isas opened before January 29 of this year, rising to 0.5% or 0.55. % last Wednesday.
While some may bow their noses at such a slight increase, at a time when rates on easy-to-access accounts barely reach half a percent, it’s at least a step in the right direction.
The mutual has also launched a pair of accounts only for existing customers, one paying 0.65% and allowing six withdrawals per year, and a regular saver paying 3.5% on between £ 10 and £ 500 of savings per month. which can be accessed. after 12 months.
Mortgage companies, by being owned by their members rather than their shareholders, can pay better rates in the form of a dividend. Think of the Yorkshire giveaway as a payment of £ 36million.
Nationwide Building Society, Britain’s largest, aims to provide ‘member benefits’ worth £ 400million per year in the form of additional ‘value’ provided to its members. savers and its borrowers.
It exceeded that £ 135million target in 2020-2021 after cutting its savings rates, but in his latest financial results CFO Chris Rhodes said he expected the mutual to do so. again exceeds “in the medium term”.
Meanwhile, the regulations mean that at least 50 percent of their loans are funded by deposits made by their members, which they have to pay.
Often it is much more. For example, £ 33.4 billion of the Yorkshire Building Society’s £ 47.9 billion in assets or loans were funded by ordinary savers last year, according to its latest findings.
At the same time, by the end of December, it had drawn just £ 450million in low-cost financing from the Bank of England’s latest term finance program, launched last March with the aim of injecting money into cheap money in banks and building societies to keep them. ready.
Others, like Nationwide and Coventry, Britain’s second-largest mutual, have withdrawn billions of pounds more, but that’s still paltry compared to the amount of money they’ve taken from savers.
Although they differ in what they think, the four major UK mortgage lenders are all using their latest financial results to the point of outperforming the market average when it comes to their savings rates.
And Coventry and Leeds, the fourth largest, paid 1.18% and 1.19% on average, well above the standard market rate. There may also be benefits in the form of lotteries or other freebies.
|All accounts easy to access||Easy-to-access sales accounts||Easy-to-access closed accounts|
|Average of the construction company (45 service providers)||0.26%||0.18%||0.28%|
|Bank average (109 service providers)||0.24%||0.12%||0.26%|
|Source: Savings Champion|
Nationwide recently launched its fourth savings lottery in the past 15 months, with a £ 1million fund open to anyone who is or becomes a customer by August.
It also spiced up the Isa season a bit after launching an 18 month fixed rate Isa which offered a £ 50 bonus to existing customers who transferred £ 10,000 there.
The deal, now out of sale, had nothing to complain about per se, beating every Isa cash with a term of less than three years.
Average rates on easy access for sale accounts offered by 45 mortgage lenders were a third higher than those offered by 109 banks, according to figures from Savings Champion.
When it comes to all accounts, both “closed” accounts and accounts for sale, mortgage lenders still outperform banks, but only by 0.02 percentage points.
However, paying higher rates to loyal savers is not limited to member-owned mutuals.
While the big street banks are happy to pay longtime savers as little as 0.01%, or £ 1 interest on every £ 10,000 of savings, some smaller, more competitive banks are more equitable.
Ford Money, which funds auto finance loans for the parent company of the same name, is committed to paying existing easy-to-access savers in the same way as new ones.
Its flexible saver is currently off sale at the moment, but the zero-rated version is currently available and pays 0.3%.
However, this is lower than the current 0.46% best buy available from Cynergy Bank.
And Wrexham-based savings bank SmartSave, which is part of Chetwood Financial Group, also offers preferential offers or the same offers to its existing customers, who are those who currently have a fixed rate savings contract with the bank.
In the future, this could potentially be extended to all customers who have already done banking with SmartSave, according to its commercial director, Julia McColl.
Although its accounts are currently out of sale to newcomers, the bank, which has a balance sheet of £ 200million, is paying 0.85% on a one-year fixed rate bond, which would be enough for second place in our best buying charts.
Its other fixed-rate contracts pay between 1 percent and 1.45 percent over terms of two to five years.
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