The last few years have been tough for savers, but there were some encouraging signs during 2017, with best buy rates going in the right direction throughout the year.
So, can we expect this positive trend to continue and what other events will be taking place in 2018 which will have an impact on the savings market?
Here we take a look into our crystal ball to see what savers can expect and, as always, we will keep you up to date with all of the key events and news as we have it throughout 2018.
Interest rates and competition
The last few years have seen the upsurge of the so-called ‘Challenger Banks’, basically lesser-known providers that are challenging the big high street names – in many cases new names to the market.
The key for savers is that these challenger banks have been offering much better interest rates than the high street and so have dominated the best buy tables. 2017 saw improved best buy rates across the board and this positive news was in the main supplied by these providers.
At this stage, there is no reason to believe that 2018 will be any different – these providers will continue to encourage savers in, by pushing rates in the right direction, so that they can meet their own funding requirements and lending activities.
Whilst it would be nice to see the high street providers turn over a new leaf and start offering more best buy rates, their actions over the last year does not fill us with a huge amount of encouragement.
With potentially even more improved rates on offer, 2018 could be the year to review your current savings and switch from low-paying accounts - review your existing accounts and see how they stack up, using our free Rate Tracker service
And keep an eye on the market with our regular Rate Alert emails, with details of new and interesting accounts as they are launched – so, if you’re languishing in a low-paying account, make the switch!
Bank of England base rate rise
Following November’s highly anticipated base rate rise, members of the MPC were quick to suggest that this was not a one off and that Britain would face more rate hikes in the years to come.
Ben Broadbent, the deputy Governor of the Bank of England said on BBC’s Today Programme just after the base rate rise “We’ve said, given all the things we assume in our forecast, many of which will be misses - there are always unknown things and unpredictable things happening - but given our outlook currently, we anticipate we will need maybe a couple more rate rises, to get inflation back on track, while at the same time supporting the economy,”
Of course we’ve all heard that before, but it would be good to think that this could happen, although it is not expected to be anytime soon and when it does happen it will continue to be “at a gradual pace and to a limited extent”
The end of cheap money for banks and building societies?
Many would argue that two policies that have affected savers most in the last five years have been the Funding for Lending Scheme (FLS) and the Term Funding Scheme (TFS).
These schemes were put in place to make cheap money available for providers to lend out to consumers and businesses. Regardless of good intentions, the knock-on effect for savers was disastrous, as the providers did not need their deposits to fund their lending activities, so no longer needed to attract them in with tempting interest rates.
The good news is that these schemes will be ending in early 2018 and whilst we may not see an immediate impact, particularly as providers do not have to pay back the money borrowed immediately, we will hopefully see more competition in the savings market going forward.
If providers can no longer rely on cheap money from these schemes, then it stands to reason that they may need to turn back to savers and attract them in with better offerings.
The arrival of open banking
January 2018 will see the implementation of PSD2 or ‘open banking’ and whilst we are still awaiting the finer details of how this type of arrangement will work, in theory there could be a number of advantages for consumers.
Open banking means that companies could have access to a customer’s account data, with the customer’s permission, including transaction history and balances. This would allow these businesses to display all of a customer’s account information in one place to allow for effective management of your daily finances.
The ability to see your account details in one place could represent a real leap forward for those wanting a more effective view of their finances as a whole and hopefully this will encourage them to switch if they are not being offered a good deal. Of course we will bring you more information when we have it.
New entrants to the savings market
As mentioned above, 2017 saw a number of new faces in the savings market, some of which made an immediate name for themselves by offering eye-catching best buy rates.
A number of these providers went straight into our best buy tables at launch and have featured regularly since, for example PCF Bank, recipients of the prestigious ‘Best New Provider’ award at our recently announced 2018 Savings Champion Awards.
Also worthy of a mention is Wyelands Bank, highly commended in this category and another regular inclusion in our best buy tables.
We are aware of a number of potential providers waiting in the wings, at various stages of the application process for a banking licence – so 2018 could be another good year for new faces.
After all, more new providers will lead to increased competition an they will certainly be aiming to make a splash by offering good deals for savers. Competition between providers is the key driver for improved savings rates and so the more that join the race, the better that will be for savers.
It is also worth mentioning that we have also seen more app-based providers come to prominence, such as Atom Bank and Starling Bank. This growing area of the market will be something to watch out for in 2018, as more providers aim to take advantage of the interest and appetite for technological advances.
Whatever happens in 2018, we will be there to provide you with all the information you need. We live and breathe savings, so whatever the news, we will be right there with our fingers on the pulse.
Whatever your savings needs are in 2018, get in touch and let us know, call us on 0800 321 3581 or send us an email – we’d love to hear from you.