The impetus is on savers to swiftly snap up the market-leading fixed rate bonds that temporarily flood the market before vanishing within a matter of days.
Last Monday, Chorley Building Society (CBS) released what can now be perceived as a ëpromotionalí new savings bond paying out at a rate of 2.75%, blowing the previously most cost-effective offering of 2.36% on Secure Trust Bank top fixed rate bond. CBSí fixed rate bondís value to savers is illustrated by its outstripping of the leading 3 year account, from United Bank, which pays out a mere 2.7% by comparison.
Yet on Friday, CBS have pulled their bond off the market, which implies it attracted the number of fresh clientele CBS sought after and has outlasted its prospects for profitability to the lenders.
Steve Penlington, Chorleyís chief executive, wrote on CBSí website that the ëoverwhelming successí of their market leading fixed rate bond was the reason for its withdrawal. At first glance, this statement appears paradoxical, and in the context of many other sectors removing a hot product from the market is entirely unprofitable and fairly ludicrous.
However, in a banking sector driven by an underlying dedication to increasing revenue and profits, savers must be vigilant over the timing of these generous bondsí release, otherwise they will inevitably lose out. Put simply, banks donít want to top best buy tables; excess cash in the form of too many deposits is not cost-effective as far as lenders are concerned ñ they donít want to lose out either.
Unfortunately, ëlosing outí is an experience suffered by the majority of savers in todaysí market. With average rates on ISAs plummeting by 40%, and the amount of interest averagely accrued on 1 year fixed rate bonds also being marginalised by lenders, one can have no shortage of sympathy for struggling savers everywhere.
However, lenders have enjoyed subsidisation via the Coalitionís Funding for Lending scheme, and are under far less pressure to acquire deposits in an age of economic growth compared with when they were wading out of the murky waters of the credit crunch.
Moreover, with a base rate hike expected, their need for saversí funds will wane all the more and savers could have to acclimatise to an era of slashed interest rates and limited opportunity.
Profitability in savings accounts rests on individualís proactivity in the obtainment of top fixed rate bonds, as falling ISA rates & easy access rates combined with tied-up, inaccessible funds at poor interest rates will not cut the mustard.
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