I can’t help but think we’re seeing a change in the ways providers price their savings accounts and I wonder if the tide is starting to turn? Recent weeks have seen a raft of new best buys hitting the market but without the usual large bonuses that have become all too common over the years.
As the Bank of England interest rate is still at a record low, providers have had to bolster rates with hefty bonuses to draw in new money. These bonuses however now form such a large part of the rate that when the bonus drops off your interest virtually disappears (Halifax Online Saver for example, 2.80% rate with a 2.70% bonus for 12 months, so the underlying rate is a miserly 0.10%!!!)
However, with the launch of Virgin's new competitive accounts via Northern Rock and M&S’ new ISA - both competitive at 2.85% and 3.00% respectively - followed swiftly by the launch of Investec’s High
5 and High 10 accounts (which track the average of the best buys but without a bonus), I can’t help but think that providers have had to change tack.
Have savers been waking up and moving their money after the bonus periods end? Certainly, following our daily chats with customers and providers, it’s become apparent that many are offering their existing customers incentives not to move their money at the end of the bonus term. In most cases this is just an extended bonus but naturally it rarely puts the customer back on best buy status. It tends to be just enough to try and encourage those customers not to switch their account. It’s the ‘I can’t be bothered with the hassle of moving’ syndrome that so many providers take advantage of. But is it enough? Judging by these new product launches, possibly not?!