Banking News

The most recent results for the banking service standards from the Financial Conduct Authority (FCA) show that banks are making little progress to improve their service standards.

The latest results cover 1 January 2020 to 31 March 2020 and show that while there has been progress in some areas of customer service, banks are still failing to improve in others. Most notably, more banks can open a normal account within one day, with the average time taken to issue a new card being just under five days. However, some banks are still making customers wait for weeks to replace cards that have been lost.

On a positive note, the time taken to gain access to online banking has continued to improve across the sector. At the other end of the scale, six banks remain unable to provide an instant decision on overdraft requests taking just under four days on average.

These service performance results are issued quarterly by the FCA and shows how quickly banks and building societies carry out a series of common banking services. The FCA introduced these standards with the aim of helping customers choose a bank account in the full knowledge of the service experience they can expect the receive.

There’s more information on the independent service quality survey in our helpful guide: How satisfied are consumers with their banks?

Savers looking to lock their money into a short-term bond will be disappointed to learn that the average rate on a one year fixed rate bond has fallen below 1% for the first time in three years.

Data from the soon to be published Moneyfacts UK Savings Trends Treasury Report shows that the average rate on a one year fixed bond stands at 0.99%, its lowest since May 2017 when it was 0.98%. As well as this, the average one year fixed ISA rate has also fallen and now stands at 0.91%, the lowest it has been since June 2017 when it was also 0.91%.

This will have a significant impact on savers who locked their money into a short-term bond during 2018 or 2019, as they will find the savings rates currently on offer to be much lower. Rachel Springall, finance expert at Moneyfacts.co.uk, explained: “Those savers who are about to come to the end of their fixed bond may wish to prepare themselves for a shock, as they will find the top rates have dropped substantially over the years. Indeed, a year ago the top one year fixed bond paid 2.20% as an expected profit rate from Bank of London and The Middle East (BLME), but today the top deal pays 1.50% from Gatehouse Bank as an expected profit rate, 0.70% less. On an investment of £20,000, that is a total interest loss of £140. In May 2015 the top five year fixed bond paid 3.09% from United Bank UK (now UBL UK), so a saver coming off this deal and is now looking to lock their money away for five years with the top deal from Gatehouse Bank, that pays 1.85% as an expected profit rate, will note a difference of 1.24%, a total loss of £1,240 on a £20,000 investment over five years.”

Falling average rates have also impacted easy access accounts, with the average easy access rate dropping to 0.40% at the start of May, from 0.51% in April. This was the biggest fall since December 2012, three months after the Funding for Lending Scheme was launched. In April, a new Funding for Lending Scheme was introduced, which together with the historic low base rate cut that took place in March, could see easy access savings rates fall further over the next few months.

Springall added: “If savers are looking for some flexibility with their cash then they may turn to an easy access account, however as these pay a variable rate the return could drop at any point. In fact, the market is already seeing a domino effect of rate cuts, with some of the top deals worsening in recent weeks. Providers are perhaps cutting rates to deter deposits due to demand or find they are much higher up the rate tables than they can cope with. Indeed, according to the Bank of England £11 billion flowed into sight deposits (such as easy access accounts) during March.”

Savings market analysis - average rates 

*Longer-term bonds or ISAs are those with terms over 550 days. Average interest rates based on a £5,000 deposit as at the start of the month. Source: Moneyfacts Treasury Reports 

Despite the impact the Coronavirus pandemic is having on education, the Student Loans Company (SLC) has recommended that students start preparing their finances for the new academic year as soon as possible.

In fact, new students have just a week left to submit their applications for next year’s student finance, with the applications needing to be submitted before 22 May 2020. The SLC has stated that new students do not need a confirmed place on a course to apply and they can use their first choice of course on their application instead. They are able to update their application later if this changes.

Returning students have until 19 June to reapply for their next year’s student finance.

The easiest way to apply for student finance is online at gov.uk/studentfinance. The SLC has also set up a dedicated resource for parents and partners who are supporting applications, which can be accessed here https://studentfinance.campaign.gov.uk/.

Commenting on the need for students to act quickly with their finance applications, Derek Ross, executive director of operations at SLC, said: “We recognise that students will have much to consider at the moment. However, for those going to University this autumn, it is important that they make applying for student finance a priority. SLC has worked hard to ensure the continuity of the application service throughout the COVID-19 pandemic and the message is still that students should get their applications in ASAP to ensure that their student finance is in place for the new academic year.”

Today Virgin Money has increased the rate on its current account, which now offers one of the most competitive interest rates on a current account with an overdraft facility.

The Virgin Money Current Account now pays 2.00% gross on balances of up to £1,000 , an increase from its previous rate of 0.50% gross. In addition to this, the Virgin Money Current Account offers an overdraft facility that charges 19.9% EAR on both arranged and unarranged overdrafts.

Today’s news is good news for savers looking for a competitive rate on a flexible account in which to deposit a portion of their funds, especially as we reported earlier in the week that a number of providers are set to cut rates this month. In addition to this, the Virgin Money Current Account now beats the rate on the highest-paying easy access account, which currently stands at just 1.20%, making it an attractive option for savers with small funds. However, savers looking to deposit funds of more than £1,000 should consider other options as those customers depositing the maximum of £1,000 into the Virgin Money account will see a return of just £20 a year.

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “It’s exciting to see Virgin Money boost the credit interest rate on up to £1,000 held in its current account by a substantial 1.50%. This month there are many alternative brands cutting their credit interest rates, so it’s encouraging to see Virgin Money buck the trend. This current account could be a great choice for consumers looking to make their savings cash work harder for them, but they must also compare the rest of the accounts details as well.”