Investec announced this morning that its High 5 account, a favourite of mine, has closed its doors to new customers..
Existing customers are unaffected except for a new £100,000 cap on account balances, although it won’t apply to balances already above this.
The account will continue to pay the average of the top 5 savings rates published on the Moneyfacts website across the categories of no notice accounts, notice accounts, internet accounts, monthly interest accounts, accounts for the over 50’s and accounts with an introductory bonus.
My guess is that the account has become increasingly expensive for Investec to fund, especially given its growing popularity over the last couple of years. Many of the other savings accounts used to calculate the High 5 rate operate on thin margins, or are loss leaders from banks keen to attract new customers. But whereas the competition invariably cuts ‘best buy’ rates to more profitable levels over time, Investec doesn’t have this option because of the way its rate is calculated.
Investec uses most of the deposits it takes from savers to lend to businesses. If lending hasn’t grown at the same rate as savings, which seems likely, then Investec is probably left with surplus cash earning an insufficient return to pay its competitive savings rate. Throw in a few bad debts on existing lending and the squeeze on its margins becomes even tighter.
If you already have a High 5 account I don’t think there’s reason to panic. But as we’re still in uncertain times I’d suggest playing safe by holding no more than the amount covered by the Financial Services Compensation Scheme, currently £50,000 per person.
Read this article at http://www.candidmoney.com/articles/article83.aspx
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