Savings & Deposit Rates – A Significant Improvement
The first and most important statement is that, at Insignis Cash, we have seen a material increase in the savings rates offered by our banking partners. Savings rates hit their lows earlier this year and have been steadily recovering over the last 2 months.
The table below quantifies this increase with individual rates increasing between 30% and 69% across the maturity spectrum.
The % increases for Individual accounts are also true of our other clients such as Corporates, Charities, Trusts and Pensions.
Why are rates increasing?
As we have mentioned in previous articles, there is only a partial correlation between savings rates in the UK and the central banks’ base rate. This recent improvement is driven by the increase in demand for funding due to good, old-fashioned supply and demand for deposits to then provide increased lending, primarily in the mortgage market.
Will rates hold at these levels?
We are often asked where rates will go from here with multiple, high-profile discussion points such as the end of the stamp duty holiday and the overall speed of the recovery creating debate. Our perspective is that this can lead to ‘FOMO’, the fear of missing out, in this case of higher rates in the future, and can paralyse any decision.
Our guidance here is clear:
- Prioritise risk reduction by using multiple banks. This is cash, keep it safe.
- See the potential returns as relative to what the deposit is currently earning rather than second-guessing the future rate environment.
- Establish the choice of maturities by when you will need the money back.
Points one and two are relatively easy discussions points with our clients as risk goes down and return goes up. The initial creation of a deposit portfolio tends to focus on the third point, the maturity choices. This is more complex for clients who are not sure when they will need the money back. In this case, many clients conclude with a ‘ladder’ portfolio where they place funds in a mix of maturities from Easy Access out to 1–2-year deposits so that they have ‘rainy day’ flexibility and the flexibility to take advantage of higher rates if these come to fruition.
Find out more
If you would like to discuss any aspect of this Insight article in more detail, then please get in touch with us at info@insigniscash.com.