Expat savings rates hit by deals withdrawal over market confusion

Published:  10 Jul at 6 PM
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Tagged: UK, England
Mixed messages by the Bank of England on future interest rate rises have caused providers to withdraw appealing short-term fixed rate deals.

Confusion in the markets is the result of two contrasting statements over two consecutive months by BoE Governor Mark Carney. Early in June, Carney hinted that a base rate rise was on the cards as early as autumn this year.

However, another statement by Carney to the Treasury Select Committee just weeks later appeared to contradict the good news. In it, he played down the likelihood of an imminent base rise, citing slower wage growth and faster unemployment falls than had been anticipated.

Treasury Select Committee member MP Paul McFadden told the media that the contrasting statements had confused the market to the extent that good deals on offshore fixed rate savings were being withdrawn or priced down. Waxing hot and cold, he added, is not good news for savers.

Experts in the sector are expecting a rate rise early in 2015, making short-term fixed rate deals the best idea for savers at present. However, competing offshore banks have withdrawn popular deals almost overnight, and are now looking to announce new short-term products in the near future.

Given that recent rate offerings on offshore fixed rate savings deals haven’t even covered inflation in the majority of expat destinations overseas, the news is discouraging, to say the least. Permanent Bank’s rates are probably the best offshore at present, and Skipton’s three -year fixes on £10,000 plus at 2.25 per cent are closer to rates offered by local banks in popular expat locations abroad.

Expat reluctance to invest in local banks in their host countries has been eroded by abysmally low offshore rates on offer over the last several years. However, for expats willing to change their habits, it’s important to check the level of capital protection in the host country, as well as any withholding taxes due on profits.
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