Saving rates remain the same at Kaupthing Edge
by Kay Murchie
The Bank of England’s Monetary Policy Committee (MPC) announced it was lowering interest rates from 5.25% to 5% yesterday, which was widely expected by economists.
This usually means good news for homeowners but bad news for savers. However, bucking the trend for the second time is Icelandic bank, Kaupthing Edge, who yesterday announced it will leave its savings rate at 6.5%.
Commenting on the announcement, Ashley Whittaker, head of retail savings at Kaupthing Edge, said our decision to lower the base rate is likely to cause a flurry of rate adjustments within the savings market. Savers should grab this opportunity and review their savings to ensure that they are still getting a competitive deal on their money.
Kaupthing’s announcement will put pressure on its other foreign-owned rivals who include Nigerian-owned FirstSave, Icelandic Landsbanki, ICICI of India and Dutch-owned ING Direct.
Kaupthing is the only bank to retain its rates since two of the smaller building societies, Cumberland BS and Chesham BS, did so prior to Christmas by formally announcing they would not be reducing their savings rates.
However, the decision by Kaupthing raises concern about the security of the Icelandic banking system. According to analysts, concern is surrounding the strength of Iceland’s economy and of its banks. Richard Killingbeck, banking expert and deputy chief executive at Close Brothers Investments in London, said in the past, these banks would have accessed wholesale markets for funding, but following the credit squeeze, that source is now closed.
Kaupthing has been subject to unfavourable press after Morgan Stanley revealed its borrowing costs have increased 400% over the past year and analysts concluded it is 7.5 times more likely to default than any other European bank.
However, savers in the UK can be assured that their savings are covered up to £35,000. Furthermore, Kaupthing maintains it has the best rate guarantee, promising to be at least 0.30% higher than the Bank of England base rate until 2012.
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