[quote user="Graeme"]
Comments received from a Moneyfacts.co.uk user:
"Why are cash ISA interest rates so poor compared to say Regular Savings Accounts? Are the banks taking our tax free element and keeping it for themselves? Surely with a lump sum of £3000 approx they can give better returns than the paltry offerings at present. Hardly any point in having a tax free account if the interest is virtually nil. Any ideas?"
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There is nothing new in banking; every so-called banking product is an embellishment on borrow at low cost, lend on at high cost. Bankers are also herd animals, always following the lead of another, thereby forming an unofficial cartel. At present, the public have no option but to deposit money at very low cost and, if the wholesale money market remains sclerotic, retail deposits are forming the bulk of money to lend; try and borrow with or without security at 1%! You are therefore justified in thinking bankers are boosting their balance sheets at the public's expense. However, there is a ray of hope; eventually, a banker will break the cartel, offering higher deposit rates than others, so providing you are satisfied about the security of your deposit, others will be forced to follow in offering higher rates. However, watch out for the idiot banker who offers mortgages of 125% of property valuation to some borrower at more than twice his income available to service that mortgage! I agree with you that deposited money has a value to both the depositor and the banker and that value is much greater than 0.5%p.a. The so-called Bank of England base rate has little and decreasing relevance to savers!