Halifax Websaver Fixed Rate Savings Bonds Analysis
Personal_Finance / Savings Accounts Aug 03, 2008 - 08:12 PM GMTBy: Nadeem_Walayat
I have been tracking the Halifax fixed websaver rates for a number of years now, which includes periodically pulling the data down as the Halifax fixed rate websaver tends to usually provide good rates of interest whilst at the same time being easy to open for existing customers, the accounts can be opened instantly online and provide for instant online transfers between in house accounts.
The Halifax is Britains biggest mortgage bank and is being hit by the double whammy of a UK housing market in full crash mode and the lack of money market funding available due to the ongoing credit crunch. This means the Halifax needs increasing amounts of cash to walk through the doors, and in doing so has been enticing high street customers with high fixed rate deals despite three cuts in UK interest rates from 5.75% to 5%.
Halifax Websaver Fixed Rates Historic Record
| Date | 3 Months | 6 Months | 9 Months | 1 Year | 2 Years | 3 Years | Base Rate |
| 28th feb 07 | 5.30% |
5.45% |
5.50% |
5.55% |
5.60% |
5.65% |
5.25% |
| 16th Apr 07 | 5.45% |
5.60% |
5.70% |
5.80% |
6.12% |
6.12% |
5.25% |
| 16th Jul 07 | 6.15% |
6.30% |
6.45% |
6.53% |
6.53% |
5.75% |
|
| 21st Sep 07 | 6.13% |
6.60% |
6.40% |
6.30% |
6.75% |
5.75% |
|
| 20th Oct 07 | 6.71% |
6.30% |
6.40% |
6.50% |
6.50% |
6.50% |
5.75% |
| 6th Jan 08 | 6.78% |
6.25% |
6.30% |
6.35% |
6.35% |
6.35% |
5.50% |
| 1st Feb 08 | 5.58% |
5.91% |
5.56% |
5.50% |
5.30% |
5.25% |
5.50% |
| 20th Jun 08 | 6.01% |
6.40% |
6.65% |
6.20% |
6.50% |
6.85% |
5% |
| 2nd Aug 08 | 6.01% |
6.40% |
6.65% |
6.60% |
6.60% |
6.85% |
5% |
Up until the credit crunch started to bite when the interbank money markets first froze during August 2007, the spread between the Halifax 1 year fixed rate websaver and the base rate tend to be less than 1%, i.e. averaging approx 0.75%. The initial impact of the credit crisis was to change market sentiment in favour of a rate cut rather than rate rises, as during August 2007 the consensus view was that UK interest rates were headed much higher with many mainstream commentators suggesting rates of above 6.50% to combat inflation. My forecast at the time was for an imminent peak in UK interest rates and for a trend to 5% by September 2008, which is as exactly what has transpired, but more on that for a future article.
The first cut in UK interest rates in December 07 was met with relief from the banks as they sought to cut fixed rates in advance of further sharp cuts in UK interest rates, this lead to a sharp drop in the fixed rates offered by the Halifax from a peak of 6.5% for the 1 year fix in October 07, to just 5.50% in advance of Feb 08's quarter point rate cut. Followed again by the April cut. However the rate cuts failed to unfreeze the money markets as by April 08 the UK housing market had started to fall off the edge of the cliff and was heading for a summer crash. This immediately left banks short of cash as they scrambled to make provisions for further bad losses, thus the Halifax websaver rates have surged higher back towards credit crunch extremes, which has seen the 3 year fix now rise to 6.85%.
Whilst the Halifax offers a good rate, it does not offer the highest rate as rates above 7% are available from a string of cash starved banks such as ICICI, Firstsave and Icesave, however the problem with these banks is that they are foreign owned and therefore if one should go bust then that would complicate the process of recovering the first £35k of savings.
However the credit crunch does present savers with a window of opportunity to lock in high rates relative to the base rate now in advance of sharply lower UK interest rates a year from now. More on the prospects for UK interest rates for 2009 in the coming week.
But basically you don't get saving rate fixing opportunities like this every day, infact according to my research it tends to occur about once every 3 years!, as usually prospects for sharply lower UK interest rates are proceeded by deep savings interest rate cuts by as long as 6 months before the first rate cut in the cycle. Whereas this time we have had three rate cuts AND a hike in savings fixed rates.
Off course the risk is that the banks could go bust, in which case you must adhere to the rules of not investing more than £35k in any one banking GROUP, and also ensure that the banks are fully compliant with the banking code and registered with the FSA compensation scheme, that the government proposes on raising to £50k by the end of this year.
Though before you fix, remember that cash ISA's (preferably fixed ISA's) should be your first port of call for tax free savings accounts.
By Nadeem Walayat
http://www.marketoracle.co.uk
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