UK Banks Short on Cash Entice Savers With High Interest Rates

By: Nadeem_Walayat

The tables have been turned on the UK banks! Despite NO interest rate rise since July 07 financial institutions are falling over themselves to entice savers into depositing funds in both short-term and fixed rate savings accounts. Which gives UK savers a golden opportunity to take advantage of the current weakness in the banking system and lock in excellent rates before they evaporate.

The reason for the current situation has been the ongoing credit crunch which has meant that the traditional interbank liquidity markets have dried up as banks seek to reduce market risks. The Market Oracle has been writing about the impending credit crunch for close to a year now, right from the dawn of the US Housing bust that implied a credit squeeze would be unleashed onto the financial markets, without repeating the dynamics of the credit crunch, you may find the articles listed at the end useful.

Selection of Fixed Rate Savings Accounts

When considering depositing into savings accounts, remember that it is entirely possible that at the worst point of the current financial storm that some banks may even go bust, especially those with the greatest exposure to the mortgage market and subprime toxic waste. The problem is we don't know exactly who will be hit the hardest until Mid 2008, but those with large subprime mortgage books are riskier propositions as they can expect to have a greater number of defaults, and in that light to ensure that your savings in any particular bank are no greater than that which are protected by the Financial Services Compensation Scheme (FSCS).

FSCS protection is currently 100% of the first £2000, and 90% of the next £33000. Which effectively means the maximum protection is for £31,700 on savings of £35,000. Therefore £35,000 should be the maximum deposited with any UK financial institution.

More articles on the credit crunch

• 22 Aug 2007 - UK Housing Market Crash of 2007 - 2008 and Steps to Protect Your Wealth
• 19 Aug 2007 - Credit Crunch Special
• 31 Jul 2007 - Hedge Fund Subprime Credit Crunch to Impact Interest Rates
• 20 Mar 2007 - The United States of Foreclosure - Subprime fiasco to trigger Stock Market Crash
• 22 Feb 2007 - US Housing Market Crash to result in the Second Great Depression
• 18 Dec 2006 - Last Warning! Three-Pronged Collapse ... Stocks, Bonds and Real Estate

By Nadeem Walayat
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