In the UK, interest rates have been continuously increasing, as in the rest of the world. Mortgage and lending interest rates have responded quickly to the Bank of England’s base rate. However, consumers have yet to see a change in their savings accounts.
Banks’ reluctance to increase savings rates in line with the gains on mortgages has attracted criticism, particularly as the earnings of the first half of 2023 start to emerge. Many of the major banks reported vast improvements in profit margins in the first quarter of the year, which have been sustained throughout the following months.
On average, major banks’ easy access savings account interest rates have remained between 0.5%-1.4%, while mortgage rates have averaged between 5-6%, in line with the Bank of England’s base rate. Other savings accounts requiring consumers to hold money for a fixed time have increased slightly but are in the minority.
“It’s disappointing that despite the high interest-rate environment, many savers continue to receive low returns,” said Erki Kilu, CEO of LHV Bank.
Supporting Consumers and SMEs
LHV Bank, which received a UK banking license this year, today announced its collaboration with Raisin UK, marking its first step into personal savings.
“We want to introduce more choice and competition into the UK savings market,” continued Kilu. “Partnering with Raisin UK, we aim to offer rates that challenge this status quo.”
LHV’s first product on the Raisin UK platform is a one-year fixed-term deposit with an interest rate of 5.52%.
Raisin UK is an online marketplace for savings products, allowing users insight into the range of savings accounts and rates available on the market. The LHV product sits in the middle of interest rates available for one-year fixed-income bonds on Raisin UK’s site.
LHV has been active in the UK since 2018, working with a number of fintechs. They secured a UK banking license in May 2023, one year after application, allowing customer deposits to be insured for up to £85,000. The bank also expanded into SME lending last year by acquiring North Bank’s loan book.
The deposits from the savings accounts will directly support their SME lending division.
“We believe that by aligning the interests of savers and business owners, we can create a win-win scenario that provides competitive returns while simultaneously boosting the UK SME sector,” elaborated Kilu.
The move towards savings accounts is part of a broader offering of direct-to-customer savings products set to launch in 2024. “This collaboration with Raisin UK is merely our first step. As a digital-first bank, we intend to use technologies to deliver superior digital savings experience for our customers,” Kilu continued.