Major UK banks should be ready to join in a round of consolidation in European banking. The British economy is stagnant, competition from challenger app-based banks is intense, and the government is determined to tax businesses out of existence. A major takeover of a European bank would put each of them on the global stage, and if they got it right, could power their profits for a decade or more.

In the sector's biggest takeover offer for more than a decade, Italy's UniCredit tabled a $40 billion offer for Germany's Commerzbank, which it has been stalking for years. What happens next remains to be seen. It is very hard to win a hostile contest for a eurozone financial institution, and certainly one as large as Commerzbank.

UK banks should join a unified European financial system

A round of consolidation within European banking is inevitable over the next year. The EU has finally realised it needs a unified financial system if it is to improve its competitiveness. But hold on - surely the major British banks should be taking part in that process? True, Britain is no longer part of the EU. But it is still part of the wider European economy, even if officials in Brussels would prefer that it wasn't. If a major eurozone bank is up for sale, then they should be looking at it very seriously.

Firstly, it is the natural space for expansion. There is not much scope for takeovers within the British banking market, while the US is a very hard market to crack and Asia offers limited opportunities. By contrast, all the major European finance markets are geographically close. A takeover or merger would offer huge scope for cost cutting, while the leaner management that UK banks have perfected would mean it would not be hard to make their branches and loan books more profitable. Continental banks are not very efficient, so it should be possible to squeeze out higher profits.

Secondly, UK banks can afford it. All the major British banks have been racking up huge profits. Lloyds made £6.7 billion last year, a 12% increase on a year earlier; Barclays made more than £9 billion, a 13% rise; while NatWest, now finally fully private again, made £7.7 billion, an increase of more than 24%.

Commerzbank only has a value of £31 billion despite all the takeover speculation, and even Deutsche Bank is only worth slightly over £40 billion. There are plenty of banks across the eurozone that are now relatively small compared to the British lenders. They can be bought without taking on huge levels of debt, especially if a deal can be financed partly in shares.

Finally, the chance won't come again. The German banking industry has been struggling along with the rest of the German economy, but it will probably recover over the next decade if the country manages to restructure its industrial base. If you don't take over one of its major banks now, then soon it will be too late. You won't be able to afford them, and they won't be for sale anyway.

Likewise, the French economy has slumped, but it may revive, and so may the rest of the eurozone. Looking back, Switzerland's Credit Suisse was a major opportunity when it was rescued by UBS in 2023. The UK banks missed out that time around. It would be a shame to miss out all over again. This is a once-in-a-generation opportunity to double or more in size.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Buying a house is a major financial goal that many people spend much of their early working life trying to achieve.

With average house prices rising by 1.3% in the last year to £298,184, and houses in high-demand areas like London being worth an average £543,497, according to Halifax, being able to buy a home may seem nearly impossible.

But, if you can afford to do so, getting on the property ladder may be more worthwhile in some areas of the country than others.

Buying a house in most major UK cities outside London with a low deposit is cheaper than renting, new research by Lloyds shows.

Looking at the average house price for a first-time buyer and calculating how much the average mortgage would cost with a 5% deposit, Lloyds found that some renters could save thousands of pounds a year by buying a house rather than renting.

The mortgage calculations are based on a 4.78% interest rate fixed for five years, with a 30-year repayment term.

The top five cities where you could save by buying

Glasgow

The British city where you will save the most money by buying a house rather than renting is Glasgow, the research found, where the average price a first-time buyer pays for their property is £172,000.

Assuming a 5% deposit of £8,800, a monthly mortgage payment would cost £855 on average. But renters would typically have to fork out £1,251 – nearly £400 more – every month just to rent a property in the city, Lloyds said.

Over the course of a year, renters in Glasgow could save £4,752 by moving into a property of their own once they save up £8,800.

Newcastle

Moving just south of the border, Newcastle is the city where renters could save the second-most by buying a property of their own.

The average first-time buyer property costs £180,000 in the city, with monthly mortgage payments being £895 assuming a 5% mortgage deposit of £9,000.

Meanwhile, renters are spending an average of £1,112 a month to live in the city, £217 more than the average first-time buyer mortgage. Over the course of a year, it’ll mean the homeowner will be £2,604 better off than the renter.

Edinburgh

Scotland’s capital city is the place where renters could save the third-most by buying a house.

The average first-time buyer house here costs £243,000 – a 5% deposit would be £12,150. Monthly rental payments in Edinburgh are an average of £1,392, but mortgage payments are just under £200 less at an average of £1,208.

Over the course of a year, the average renter will pay £2,208 more for their accommodation than if they had bought a house.

Bristol

The city where you could save the fourth-most by buying instead of renting, and the first in the south of England, is Bristol, where the average first-time buyer house costs £311,000.

The typical cost of a mortgage for a house this much is £1,547 a month, assuming a 5% deposit of £15,550.

On the other hand, a renter will pay £231 more to live in the city, paying an average of £1,778 a month. Over the course of 12 months, the renter will have paid an average of £2,772 more than the homeowner for their accommodation.

Manchester

Manchester finishes off the list of top five cities where it is cheaper to own a house than rent.

In the north-western city, a first-time buyer house costs an average of £234,000, with a monthly mortgage payment of £1,164, assuming a 5% deposit of £11,700.

Paying the mortgage is typically 11.6% cheaper than renting in the city. A renter pays an average of £1,317 for their accommodation, £153 more than the homeowner every month, climbing to £1,836 more over 12 months.

The cities where it’s cheaper to buy than rent: Full list

Source: Lloyds, October 2025. Data does not include Northern Ireland, GB average excludes London.

What is stopping people from buying?

Seeing the raw figures, it may seem puzzling that so many people rent when they could actually save money (and build equity) by buying a house.

The biggest hurdle for many people who want to make the leap between renting and buying is saving up for a deposit.

When you are paying more than the cost of a mortgage to rent in a city, it can be difficult to find cash at the end of the month to put into a savings account for your house deposit.

Furthermore, average house prices have grown faster than average earnings in the past 25 years, making homes much more expensive in real terms.

In 2024, the average house in England cost 7.71 times more than the average annual salary. For comparison, this ratio was 6.85 in 2010 and 4.19 in 2000, according to data from the Office for National Statistics (ONS).

This means prospective buyers will need to save up even more money to afford a deposit.

Amanda Bryden, head of mortgages at Lloyds, said: “We know that saving for a deposit is one of the biggest hurdles for first-time buyers. With rents having risen sharply over the last two years, many are already managing monthly payments that are higher than a typical mortgage.

“That’s why low-deposit mortgages could be the right solution for many – helping people move from renting to owning sooner than they thought possible.

“It’s also important to consider other upfront costs like legal fees and moving expenses – but for most, the long-term savings will outweigh these.”

Can buying a house help build long-term financial security?

Buying a house can often be a good financial decision as it offers you more security and helps you build financial stability.

Even with a low deposit of 5%, a homebuyer could reduce their loan-to-value ratio from 95% to 87% over five years – even if their property does not increase in value by a single penny.

When combining the savings you get by buying instead of renting with the merits of paying off equity on your home, Lloyds worked out how much “better off” owners are than renters after five years.

Glasgow again tops the chart as owners are £28,978 better off than renting after five years. Owners in Bristol are £23,295 better off, those in Newcastle are £18,481 better off, those in Edinburgh are £18,412, and those in Manchester are £16,279 better off.

The table below shows how much better off owners are than renters could be after five years.

Source: Lloyds, October 2025

Not all banks are equal, so it’s no wonder that Brits are compelled to switch accounts in search for something better.

That could be anything, whether it’s a bank switching offer with a lucrative cash bonus, access to a bank branch, higher interest rates or spending benefits.

The latest Current Account Switch Service (CASS) data shows that more than 12.4 million switches have taken place since the service launched in 2013, with over a million switches made in 2025.

We look at the most popular banks that customers switched their accounts to, what made them move, and whether you should switch banks.

Which were the most popular banks in 2025?

Nationwide again proved to be the most popular banking company that customers switched to between July and September. The building society amassed the highest net switching gains (41,450).

It was followed by Monzo in second place (9,934), and NatWest in third (8,731).

We’ve compiled a list of the top banks and building societies in terms of net gains in a table below.

Customer data from the Current Account Switch Service is published three months in arrears, which is why the data here is from July to September, and not October to December.

Source: Current Account Switch Service. Data shows the number of full account switches completed between 1 July and 30 September, 2025

Of the banks and building societies listed above, four have had cash bonuses for customers switching their accounts. This includes Nationwide, First Direct, NatWest and TSB.

Nationwide’s lucrative year-round offers, such as the £100 Fairer Share bonus, which it has offered for three consecutive years now, the Thank You bonus, and member-only savings products, may have proved attractive to a large number of customers.

Meanwhile, Monzo paid customers up to £50 to refer a friend, which may have driven its popularity.

Which were the least popular banks in 2025?

While a few banks gained new customers, a lot more lost out.

Santander saw the biggest losses (-19,989), as 42,609 switches were made from the high street bank, while it gained 22,620 new customer accounts.

In second place is Halifax with a net loss of -17,341, while Chase had a net loss of -7,623. Chase lost out on many customer accounts after axing its easy access saver rate.

In the table below, we list the banks that suffered from the highest net losses between July and September.

Source: Current Account Switch Service. Data shows the number of full account switches completed between 1 July and 30 September, 2025

Access to online or mobile banking was the most frequently cited reason for choosing a new account, mentioned by 44% of respondents. This was followed by better customer service (36%), attractive interest rates (34%), spending benefits (28%) and other benefits or features (28%).

It comes after more than £31 billion was left in savings accounts paying 1% interest or less, with savers being urged to switch to an inflation-beating savings account.

Should you switch your bank account?

Switching has now become easier than ever before. According to the Current Account Switching Service data, 93% of customers in the last three years were happy with the switching process.

If you use CASS, it takes seven days for the switch to complete. It makes sure that your direct debits, standing orders, and any new payments to your old account are transferred automatically, even after you’ve switched.

However, that doesn’t always mean that moving your money to another account will be the best option for you. It’s always best to consider the long-term value of a current account, like whether you’re getting better customer service, how much you’ll incur in fees or charges, and if you have access to physical branches.

Depending on the type of account you hold, your bank may already be offering better savings rates, travel perks, or spending benefits. So if you’re switching for the cash incentive alone, it might not be worth it in the long run.

We look at whether switching banks can affect your credit score in a separate piece.

Lloyds Bank has launched a new bank switching bonus in a bid to entice customers to its Club Lloyds account range.

The high-street lender is offering £175 to new and existing customers who sign up for one of its Club Lloyds accounts, along with a host of other perks.

This makes it the fifth bank switching offer currently on the market, offering customers free cash of up to £175. It comes hot on the heels of First Direct’s £175 deal, Nationwide’s £175 switching incentive, TSB Bank’s £160 bonus and Co-operative Bank’s £150 offer.

While Lloyds Bank’s latest deal isn’t as generous as the £200 offered in late 2024, the bank is still quite popular, which means switchers will need to act fairly quickly if they want the £175 bonus.

We look at everything you need to know about Lloyds Bank’s switching bonus and how it compares to the rest of the market.

Lloyds Bank £175 switching deal – what is on offer?

Lloyds Bank is offering a £175 bonus when you switch your current account to one of its Club Lloyds accounts.

This includes the Club Lloyds (£3 a month), Club Lloyds Silver (£11.50 a month) or Club Lloyds Platinum account (£22.50 a month).

The deal is available to new and existing Lloyds customers, but you won’t be eligible if you already hold a current account with Lloyds.

To be eligible, you must:

• Switch your bank account to a new Club Lloyds current account
• Open a Club Lloyds Account (£3 monthly fee), Club Lloyds Silver Account (£14.5 monthly fee) or Club Lloyds Platinum Account (£25.5 monthly fee)
• Have a minimum of three active direct debits from your old account. This excludes standing orders and recurring card payments.

Existing customers can qualify for the £175 as long as they open a new Club Lloyds Account, Club Lloyds Platinum Account or Club Lloyds Silver Account and meet the above criteria.

The £175 will be paid into your account within three days of completing the switch.

Lloyds Bank’s £175 incentive is only available for a limited time only and customers must switch by 1 April to get their hands on the free cash.

The Silver and Platinum account imposes an extra £3 “monthly Club Lloyds fee”. This charge can be waived providing you deposit a minimum of £2,000 per month in your account. You can also waive the £3 monthly fee on the Club Lloyds account by doing this, so essentially the Club Lloyds account is free to hold if £2,000 is deposited each month.

The £3 monthly fee is set to increase to £5 from 2 June 2025.

You can make the switch online on the Lloyds website, via its mobile banking app, or in a branch.

Customers who have already received a switching incentive from Lloyds Bank, Halifax or Bank of Scotland since April 2020 won’t be eligible for this deal.

The Club Lloyds accounts also come with an attached 6.25% Club Lloyds Monthly Saver. You can save up to £400 a month and access your cash whenever you like. The accounts come with other perks too. You can choose one lifestyle benefit from a free 12-month Disney Plus subscription, Vue or Odeon cinema tickets or a digital Coffee Club and Gourmet Society membership.

The Club Silver and Club Platinum accounts also offer European family travel insurance, cover for winter sports and other activities, AA breakdown family cover, mobile phone insurance and fee-free spending abroad.

How does the Lloyds Bank £175 switch compare?

Currently, there are five bank switching deals on the market. So, how does Lloyds Bank compare to the rest?

Three of the five deals on the market are offering customers £175, so it’s worth looking at the additional perks that might put one switching offer on top of the others.

For instance, if you’re on the hunt for the best savings rate, First Direct comes out on top with its 7% regular saver attached and fee-free spending abroad. The account is also free to maintain, while Lloyds Bank’s Club Lloyds account has a £3 (soon to be £5) monthly fee.

As well as offering £175 to switchers, Nationwide Building Society is known for its £100 Fairer Share Payment that it has offered for two consecutive years. While there’s no guarantee the bonus will be paid in 2025, the mutual’s chief executive Debbie Crosbie said towards the end of last year that they were “well positioned" to repeat the payment.

Lloyds Bank’s deal is not only paying more cash than the Co-op Bank and TSB Bank but it is also relatively straightforward in comparison.

However, the bottom line is that switching shouldn’t just be about the bonus on offer, but what benefits serve you best and an account that meets all your needs.

Choosing the best bank for your money isn’t always straightforward. From switching incentives and customer service to branch access, spending benefits and the interest rates on offer, there’s a lot to weigh up before deciding where your cash goes.

We look at the most and least popular banks in a separate guide, where Nationwide stood out thanks to its lucrative cash bonus, Fairer Share payments and top savings rates.

New analysis from Which? sheds light on the best and worst UK banks and bank accounts.

We look at the winners and losers, so you can see where your provider sits.

The best UK banks – how they rank

Which? asked thousands of customers how they would rate their banking providers. The data is based on several parameters, including ease of application and service in a bank branch, over the phone, online and app-based, and customer helplines.

In top place is Starling Bank, which is one of Which?’s recommended providers for the seventh consecutive year. The bank ranks highly in customer service and current account users are happy with its online banking service. Starling also launched a new AI banking tool that helps customers learn more about their spending habits.

Monzo is another one of Which?’s recommended providers. The challenger bank impresses customers with fee-free spending abroad, cashback on eligible spending and competitive savings rates, but falls short in customer helpline services.

First Direct is also in the top rankings – it’s one of only two banks which received full five stars for customer service and telephone banking. It also offers fee-free transactions abroad, and has an attractive bank switching deal.

Among more traditional high street staples, Nationwide ranks highly thanks to its extensive branch network. The building society has pledged to protect its branches from closures until at least 2030.

We look at the full results in the table below.

Source: Which? data based on a survey from September 2025. N/A means not enough responses for a star rating.

The best UK bank accounts – how they rank

Which? has analysed different bank accounts offered by bank and building societies. The parameters it has tested include interest paid, fee-free spending, interest-free overdraft and monthly fee.

Source: Which?. N/A means not enough responses for a product rating.

How to choose the best bank account for you

Despite the above findings, banking expert at Which?, Chiara Cavaglieri, says: “For too long, the biggest banks haven’t had to work very hard to keep customers, but challengers such as Monzo and Starling have quickly made their mark. They’ve forced bigger providers to innovate, and the result is a market where different providers shine in different areas. Even if you can’t bear to ditch your longstanding bank, think about what's important to you.”

With so many accounts to choose from, there are several factors to consider before you make a decision.

While a bank switching deal means customers have extra cash to cover the Christmas festivities, Rachel Springall, finance expert at Moneyfactscompare.co.uk, warns against making hasty decisions.

“An upfront free cash injection is a great sweetener, but consumers should only ever switch accounts if the new deal offers them better value,” she said, pointing out that while free cash offers don’t last forever, customers shouldn’t feel pressured to switch.

If you’re after spending perks and travel benefits, it might be worth checking out the best packaged bank accounts.

Springall said: “If customers opt into a packaged account, one that bundles in benefits, then they could find it to be more cost-effective than taking out separate insurance policies elsewhere, like travel insurance or mobile phone insurance.”

We look at whether travel insurance is worth it in a separate guide.

“There is a plethora of different benefits to choose from, such as high interest current accounts, those with a competitive overdraft tariff, as well as packaged accounts with integrated insurance plans or even accounts that reward savers or spenders,” Springall added.

“Those consumers who plan to make frequent trips abroad can also find accounts that don’t charge them for using their debit card in an ATM or in-store, so they can avoid paying out on transaction fees compared to a more traditional bank account.”

FSCS scheme: Are your savings safe?

The Financial Service Compensation Scheme (FSCS) protects your savings and investments if a financial services firm goes bust.

This includes current accounts, savings accounts, Shariah-compliant accounts, ISAs, and more.

On 1 December 2025, the FSCS limit rose from £85,000 to £120,000. It means that you will be covered for up to £120,000 if your money is with an FSCS-protected institution.

You can check which institutions are covered on the FSCS website.

Lloyds Bank has become the first high-street bank to launch a ‘one of its kind’ ready-made pension service, which lets savers combine up to 10 pension pots and open a new pension with Scottish Widows. 

The service, named Ready-Made Pension, has launched following new research from Lloyds revealing around 42% of adults don’t know how to contribute more to their pension pot. The data also shows that a banking app would encourage 50% more savers to engage with their pension more frequently. 

While most pensioners receive the state pension, it’s not enough if you’re hoping for a comfortable retirement. According to the Pension and Lifetime Savings Association (PLSA), a couple will need an annual retirement income of £59,000 to enjoy a comfortable retirement. 

With the high cost of living and frozen income tax thresholds dragging people into paying more tax, it’s worth boosting your private pension to increase your overall retirement nest egg.

Find out how the Lloyds Bank pensions service works, if you can open one and how its offering compares to the rest of the market. 

How does the Lloyds Bank pension work? 

The new pension service will allow savers to combine up to 10 separate pension pots that were accumulated through different workplace pension schemes and personal pension pots. 

Or, if you’re looking to open a new pension, you can do so with Lloyds' own pension provider, Scottish Widows, via the new service. Whether you’re opening a new pension or consolidating pots, Lloyds says it takes your age and retirement planning into account and tailors your pension accordingly. So if you have a good number of years until retirement, the bank says it will “invest to give you the best chance of growth”. Whereas if you’re close to retirement, it will move your portfolio into low-risk investments. 

To open a ready-made pension with Lloyds, you will need a minimum deposit of £5,000 or pay at least £150 a month into your pot. If you’re looking to transfer funds from an existing pension, the transfer amount needs to be at least £10,000. 

The pensions service can be accessed via Lloyds online banking or via its internet banking app. The banking giant claims Ready-Made Pension is a “digital-first product”.

Are you eligible for the pension? 

Lloyds Ready-Made Pension will initially only be available to customers who bank with Lloyds Bank, Halifax or Bank of Scotland. 

The banking giant says it has 21.5 million customers who regularly using online banking, and around 7 million of them already check their pension using their banking app every week.

What are the fees on the Lloyds Bank ready-made pension? 

The Lloyds Ready-Made Pension account is subject to a 0.3% annual account fee (minimum of £5 a month). 

There is a 0.14% transaction fee of the value of your pension pot and an ongoing investment charge of up to 0.24%. There is no exit fee should you want to transfer to a different provider.

While Lloyds doesn’t impose an exit fee, you should check with your existing pension provider if you want to move your money to the new pension, as they might charge an exit fee. 

How does the pension compare to the rest of the market? 

Even though Lloyds is the first high-street bank to launch a ready-made pension, it’s not the only ready-made pension out there. 

Here’s how its fees compare to pension providers already on the market. 

The Lloyds annual account fee seems to sit in the middle of the market between Wealthify, which on one end of the spectrum charges a low fee of 0.16%, and Nutmeg, which charges 0.75% on pots with up to £100,000. 

PensionBee looks favourable as it doesn’t charge an investment management fee. There are no exit fees. 

If you bank with Lloyds Bank and prefer to have your banking and pension in one place, this new service could be suitable. 

It’s also worth looking at which pension providers are running transfer offers when you switch to them, and of course, making sure it's a right fit for you in terms of fees, investment options and customer service. 

Currently, Wealthify is offering up to £1,000 when you open or transfer a pension to them. 

Cheapest SIPPs on the market

If you prefer to manage your pension yourself, a DIY pension such as self-invested personal pensions (SIPPs) might suit your needs better where you can pick your own investments. 

SIPPs are similar to standard personal pension pots, but they offer more flexibility with the investments you can opt for. For example, with a SIPP you can invest in global company shares, investment trusts and property or land, but not residential. 

If you don’t feel comfortable managing your own SIPP, you can also use a financial adviser to do this on your behalf. Compared to a standard pension, with a SIPP you can make changes as often as you want. 

But, don’t forget about the fees. SIPPs are subject to platform charges, transaction fees and buying or selling funds charges. 

To have a SIPP, you need to go through an investment platform. These are five of the cheapest on the market: 

We look at how to pick a SIPP and the most popular SIPP investments in separate guides.

Increasing numbers of investors are being targeted by cryptocurrency scams, particularly on social media.

Lloyds Bank has revealed a 23% annual rise in customers reporting being scammed by fake cryptocurrency adverts.

The bank attributes much of this to a new wave of fake crypto adverts circulating on social media, targeting young victims. 

Fraudsters are trying to take advantage of increased interest in cryptocurrencies, especially after the Securities and Exchange Commission approved the first Bitcoin exchange traded funds for US investors, while values have hit record highs. 

Social media plays host to 66% of crypto scams, particularly on Instagram and Facebook, according to Lloyds research.

Victims lost £10,741 on average to crypto scams, which overtakes the loss on any other type of fraud - up from £7,010 in 2022. 

The rise comes as the cost of living continues to bite household finances, and more people are susceptible to ‘get rich quick’ promises, which scammers commonly use. 

“Often fraudsters will advertise investments in an asset that doesn’t exist or hasn’t yet been built, so don’t hand over your cash unless you’re 100% confident you’re being sold a genuine, bona fide investment,” says Laura Suter, head of personal finance at AJ Bell.

“Nothing is guaranteed when it comes to investments. If a company you’ve never heard of says it can deliver Guaranteed returns of any amount, don’t touch them with a barge pole.”

The cryptocurrency market has already been under a crackdown from the Financial Conduct Authority (FCA) since earlier this year.

Crypto trading firms have been forced to give first-time investors a ‘cooling-off period’ to ensure investors fully understand the risk. The FCA also banned advertised ‘refer a friend’ bonuses from 8 October.

“The government is pressing ahead with plans to regulate crypto in line with existing financial services, which should help to tighten up the sector,” adds Suter.

“Disturbances in the cryptoverse like the FTX scandal have heightened the global regulatory focus on crypto and the risks it might pose to consumers and financial stability, if left to its own devices.”

Knowing what a crypto scams look like can help you avoid them.

What do crypto scams look like?

There are two main ways to spot crypto scams, according to Lloyds. 

The illusion 

The fraudster will pose as an investment manager and tell you that they will invest your money on your behalf, promising huge returns. 

The scammer may show you a fake investment account showing funds that are already making a profit, but in reality, there is no genuine investment platform or cryptocurrency involved- the scammer is creating an illusion. 

It’s a tactic scammers use to trick you into thinking the investment is real, and you will make a huge return. Once they get as much money as they can out of you, they will simply disappear. 

The takeover

If you’re looking to open an account on a legitimate investment platform like Coinbase or Binance, fraudsters could jump on this opportunity to ‘help you.’

Scammers will either offer guidance in setting up your account or tell you they can set it up on your behalf. 

Once you have deposited your funds, scammers will trick you into giving your login details to them or giving them control of your digital wallet, which they can then use to control your invested money. 

Lloyds says crypto scams can come in other forms too, for example when you’re asked to pay for something with cryptocurrency. These can be common with romance and impersonation scams. 

Experts also warn that despite the scams, entering the crypto market is a risk in itself, and you should mentally prepare to lose all your money when trading crypto. 

Suter says: “Crypto is a highly volatile asset in a market which is lightly regulated, so investors must be willing to swallow a whole load of risk before diving in. Crypto poses multiple risks to consumers. Fraud and scams are rife, but even if you buy legitimate crypto, the most obvious risk is the potential for large losses.”

Myron Jobson, Senior Personal Finance Analyst at Interactive Investor recommends not to put all your eggs in one basket when it comes to crypto and to only allocate a small amount of your money.

“Cryptos remain a high-risk investment because of how much and how quickly their value can change unexpectedly,” he says.

“But, whatever your approach to risk, cryptos should only be a small proportion of a well-diversified portfolio.”

How to avoid crypto scams 

Sometimes, crypto scams might not be as obvious to spot, so try to spot finer issues first. 

Be wary of social media- First things first, question any investment-type post or message on social media, especially crypto-related. Fraudsters can easily spread fake adverts and message you directly. Look out for signs telling you that you are guaranteed a return on your investment that you won’t get anywhere else. And if you get a message out of the blue, it’s most likely a scam. 

Know the regulations- The FCA has regulated the crypto market to an extent, so know the rules before entering. ‘Refer a friend’ schemes are now banned, so any adverts like this are most likely scams. 

Since October 2023, crypto platforms wishing to market to UK customers have had to register with the FCA for anti-money laundering purposes. You can check if a platform has complied on the FCA's registered cryptoassets webpage.

Plus, the FCA has encouraged more firms to advertise warnings about the risk of losing money, so you can spot which adverts are genuine. Jobson adds: “Regulation of cryptoassets is developing at pace. Promotions targeting UK consumers now fall within the FCA’s remit. 

The government also plans to introduce laws for the crypto industry before Parliament by 2024. Progress is being made to protect consumers from fly by night fraudsters operating in the crypto space, but there is still a long way to go before a comprehensive regulatory framework for cryptos is in place.”

Never share your login- A legitimate investing platform will never ask you to share your own login details. So, if you get asked this, don’t give it away, as it’s probably a scam. And you should never transfer funds to another account that isn’t in your name, as at that point, you will have lost control of your money. 

Don’t use the cloud for back-up on security- When you access your crypto portfolio through an exchange or wallet, it requires you to log in with a password and a ‘seed phrase’ for an extra layer of security. As data stored in the cloud can easily be hacked, it’s a good idea to write down your login and any extra security information on a piece of paper and hide it safely within your home. You should stay away from storing confidential information on any device that is prone to being hacked.

Use the FCA website- Fraudsters can easily set up fake websites or social media accounts to imitate legitimate firms. To check if they are genuine, you can go onto the FCA website and find the contact details of the firm that has reached out to you. See if they match the site that you can see.  

Be vigilant- Avoid clicking on any social media pop-ups that are trying to lure you in by promising you a load of money. Similarly, if you receive any messages on social media regarding ‘quick rich’ schemes, see that as a red flag and ignore it. This will most likely be a fake social media account trying to scam you. Also, it’s a good idea to set up two-factor authentication where you can on apps and websites. That way, any hacker would need your phone or another device to authenticate your login. 

Users of iPhones are being offered an easier way to keep an eye on their bank account balance.

Many smartphone users will have banking apps on their phone that let you monitor your spending and send and receive money.

But logging in can be time consuming as you need to remember passwords and often go through two-factor authentication such as receiving text messages to confirm your own identity.

That can be frustrating if you just want to know how much is in your account.

A new Apple Wallet feature allows users to connect their credit and debit cards already stored in the Wallet app to their online accounts.

Users will then be able to see their up-to-date balance and other information without having to go to their dedicated banking app.

We have all the details on how it will works and whether it is safe.

How to check your bank balance in Apple Wallet

Many smartphone users are familiar with using their device to make contactless payments.

You upload your card details to your phone’s wallet and simply tap to pay.

The new feature will link these cards to the rest of your account information using open banking technology.

This effectively gives other parties access to your financial data to help you have more control of your money.

It is available if you bank with Barclays, Barclaycard, First Direct, Halifax, HSBC, Lloyds, M&S Bank, Monzo, NatWest and Royal Bank of Scotland.

The information will be accessible in the Wallet app, but will also appear when a user makes a purchase via Apple Pay online or in the app.

Apple said the new feature could help users make more informed purchases and get quick, simple access to see key information about their finances to help with budgeting.

iPhone users running the latest versions of iOS 17.1 will have access to the technology.

How secure is Apple Wallet?

The tech giant said the new feature had been built with privacy and security in mind and highlighted that before it is enabled users must authenticate through their financial provider’s website or app and consent to connect their accounts to their cards in the Wallet app.

Apple also confirmed that all user account balance information, transaction history and other account details are stored on device and not on Apple servers.

"By enabling users to conveniently access their most useful account information within Wallet and at the time of their purchase, they can make informed financial decisions and better understand and manage their spend,” says Jennifer Bailey, vice president of Apple Pay and Apple Wallet.

"We look forward to working with UK partners under the Open Banking initiative to help users better their financial health, and provide more ways in which banks can deepen their relationships with customers."

TSB has pulled its current account switching deal only four weeks after its launch. The offer, which was one of the best offers for switching banks, offered an attractive £150 free cash when you switched to one of its Spend and Save current accounts, plus up to £60 cashback over six months. Combined, the two offers allowed switchers to bag up to £210 in free cash.

The deal launched around mid-September when an influx of other switching offers came on the market. Lloyds sprung its £175 offer on the market just a day after TSB, and Nationwide followed with its market-leading £200 switching deal. 

It’s no surprise that banks are taking advantage of switching deals to attract new customers, as data from the Current Account Switch Service (CASS) shows around 6,100 more current account holders switched banks in August compared to January this year, with cash incentives luring in customers. 

Sarah Coles, head of personal finance at Hargreaves Lansdown said: "It’s always worth bearing in mind a switching bonus isn’t in itself a good reason to choose a bank. The underlying account itself is more important, and whether it suits your needs.

If an account you like is currently running a deal, then don’t put off switching, because you never know how long these bonuses will last for."

We don’t expect these deals to last for long. So if you’re looking to bag quick, easy cash by switching bank accounts, you will need to act fast.

Here are the remaining top three switching deals on the market right now, offering up to £200 free cash. 

What switching deals are on the market right now? 

To switch to any of the bank accounts below, you will need to use the CASS. It will make the process seamless moving all of your money, direct debits and standing orders to your new account within seven days and then closing your old account. 

Nationwide - Get £200 plus earn 8% AER on savings

Nationwide - Get £200 plus earn 8% AER on savings

The good news the table-topping switching deal from Nationwide is still around, offering £200 in free cash. Plus, by switching you can take advantage of its market-leading 8% regular saver. 

You will need to switch to either a Nationwide FlexAccount, Nationwide FlexDirect account or a Nationwide FlexPlus account. If you’re already a Nationwide current account holder who holds a current account with a different bank, you can switch that account to your existing Nationwide current account and complete the switch. 

You can open a Nationwide current account online on its website, through its mobile banking app or in branch. You will then need to request a switch as part of your application. 

To qualify for the £200, you will need to: 

Find out how you can earn a total of £337 when you switch to Nationwide, by taking advantage of the free £200 cash, its regular saver and 5% interest on balances. 

You won’t be eligible for this offer if you have already taken advantage of a Nationwide switching incentive after 18 August 2021. 

First Direct - Get £175 plus 7% AER on savings*

First Direct - Get £175 plus 7% AER on savings*

New customers who have not held a First Direct current account previously can switch and bag £175 free cash.  Plus, you can get access to First Directs 7% AER regular saver which features on our best buy table. 

To be eligible, you will need to pay in at least £1,000 within three months of opening your account.

Note, if you have opened a current account with First Direct or its sister bank HSBC on or after 1 January 2020, you will not be eligible for this offer. 

*When you sign up via this link, we may earn an affiliate commission from this deal.

Lloyds Bank - get £175

Lloyds

If you’re looking to switch to a packaged bank account, this Lloyds switching deal may suit your needs. The provider is offering £175 free cash when you switch to one of their three Club Lloyds accounts. 

You must use the CASS to switch, and once complete you will receive your £175 within 10 working days of starting the switch. 

The catch here is, the current accounts charge a monthly fee: 

If you pay in at least £2,000 to your Silver or Platinum account, you can waive the £3 monthly fee. 

Of course, with the monthly charge comes perks. 

With all of the Club Lloyds accounts you get to choose a lifestyle benefit each year. Pick from six cinema tickets, free Disney Plus for 12 months, a Gourmet Society subscription, an annual magazine subscription or a digital coffee club subscription. 

Plus, get access to Lloyds exclusive 6.25% AER monthly saver which features on our best regular savers guide. You can also earn 4% AER with the Club Lloyds Advantage saver or ISA saver. 

Other perks include 15% cashback at selected retailers when you use your Lloyds debit card and exclusive travel money and mortgage offers. 

With a Club Silver Lloyds account, the perks heat up. You can bag European and UK family travel insurance, plus mobile phone insurance and  AA breakdown family cover.

And finally, with a Club Lloyds Platinum account, you can upgrade to worldwide family travel insurance. 

You are not eligible for this offer if you have held a Lloyds Club current account previously, and if you have received a switching incentive from Lloyds or its sister bank Halifax since April 2020. 

This offer ends on 14 November. 

Read our full guide on the best bank switching offers on the market right now for more deals. 

Packaged bank accounts are current accounts that charge a monthly fee in exchange for perks such as insurance benefits, car breakdown cover, cashback, higher savings rates, and monthly freebies.

Similar to a current account, you can receive or send money, make payments and pay your bills. The difference here is that you’ll be charged between £10 and £45 a month, depending on the type of account you choose, so it’s worth shopping around for the deal that best matches your needs.

The best packaged bank accounts

We’ve rounded up some of the top packaged bank accounts on the market right now.

We take a further look at the accounts below.

What to consider before opening a packaged bank account

Before opening a packaged bank account, make sure you consider all the elements to ensure the perks outweigh the costs.

• Take a close look at any insurance policies being offered. If travel insurance is included, make sure that you’re eligible, if your travel insurance covers any activities you intend on doing, and that the policy covers countries you plan on visiting.
• If you have any pre-existing medical conditions, make sure you tell the bank when you open your account. This could hamper your chances of being accepted for the account, but it’s a better outcome than not disclosing a condition, only for something to happen down the line and find out you are not covered. We look at how to get travel insurance for over 70s in a separate guide.

Should I get a packaged bank account?

A packaged bank account might be a good option for you if:

You will use the perks: if an account comes with travel insurance, do you go abroad enough to make it worthwhile?

You don’t already have the benefits: Make sure you don’t already have the insurance coverage elsewhere. For example, have you got breakdown cover included in your car finance package or car insurance?

You will actually save money: if you were to pay for the service separately, it could work out cheaper than the account fees. Double-check before you open an account.

The account suits your needs: Don’t forget to check that the bank account is suitable too. Does it have the overdraft you need? If you need a branch, is there one local to you?

Are packaged bank accounts good value?

Working out if a packaged bank account offers value for money is straightforward: take the monthly charge and multiply it by 12 to get the annual cost. Then shop around to see what the benefits would cost you separately.

For instance, a Santander Edge Explorer account may be worth getting with the bank switching bonus, but it may not end up being worth the cost later. Make sure you repeat those processes each year rather than sticking with a packaged account for years that may no longer offer you good value.

This deal is no longer available. Please see our best offers for switching banks guide for up-to-date deals. 

Nationwide Building Society has brought back its highly anticipated bank switching bonus, giving you £200, plus a market leading 8% regular saver - meaning switchers could earn up to £377 by moving banks. 

Nationwide’s bank switching incentive is one of the highest current account switching bonuses on the market today and if you’re looking for the best savings accounts, then Nationwide’s 8% rate is now the best rate for regular savings accounts available right now.

The last time the high street giant offered a £200 switching incentive was in October 2022 - but these deals are often pulled fast when there is significant demand.

Nationwide's deal follows a string of other banks also launching switching incentives this month, which include TSB and Lloyds. TSB is offering switchers £150 plus up to £60 cashback over six months (a total of £210), and you can bag £175 by switching to a Lloyds Club current account, but the account comes with fees starting from £3.

But Nationwide’s switch £200 deal could prove popular as the bank has been scoring points with savers over the last year with incentives like 5% cashback on grocery shopping and the £100 cash boost it gave to customers as part of a profit sharing scheme, dubbed the Nationwide Fairer Share Scheme; and while not all customers benefited on the last round, Nationwide told MoneyWeek that there may be similar payouts in the future to include a wider range of customers as part of the scheme.

The building society has also consistently increased rates on savings products. 

Tom Riley, director of retail products at Nationwide, said: “We want to give people every reason to join and stay with Nationwide. We’re also rewarding our current account customers with a market-leading rate of 8% AER on our Flex Regular Saver.”

Here are all the details on Nationwide's new switching deal, the  8% regular savings account and how to earn £377 in the first year of opening the account.

Nationwide’s £200 switching deal

You can bag £200 free cash when you switch to either a Nationwide FlexAccount, Nationwide FlexDirect account or a Nationwide FlexPlus account. 

To qualify for the £200, you will need to do the following:

• Switch to a Nationwide current account using the Current Account Switch Service (CASS). The switch means you have to close your old current account and all payments will be transferred to your Nationwide account, including standing orders and direct debits. This is usually done automatically via the switch service within 7 days.
• Have a minimum of two active direct debits coming out of your Nationwide account.
• You can open a Nationwide current account in branch, online on the Nationwide website or via its mobile banking app. When you apply for a new account, request a switch as part of your application. 

Who can get the Nationwide switch bonus? 

If you have already taken advantage of a Nationwide switching incentive with a sole or joint account after 18 August 2021, you will not qualify for this offer.  

• You will qualify if you have a joint account, but want to open a new sole account, or if you already have a sole account and you open a new joint account.
• If you’re an existing Nationwide current account customer who also holds a current account with a different bank provider, you can switch too. To do this, switch your current account with a different provider to your existing Nationwide current account via online banking. You will need to complete the switch within 60 days of it being requested. 

How does Nationwide’s 8% regular saver account work? 

When you open a Nationwide current account, you also get access to the linked, market-leading 8% AER regular savings account.

The 8% rate is fixed for 12 months, after which the account will turn into an instant access account.

• You must deposit money within the first 28 days of opening the account. This can be as little as 1p. 
• You can save up to £200 per month. There is no monthly minimum deposit. 
• The account permits up to three withdrawals. On your fourth withdrawal, the rate on the account will drop to 2.15% AER variable.
• You are eligible to open the regular saver if you hold one of the following current accounts: FlexPlus, FlexDirect, FlexAccount, FlexStudent, FlexGraduate, FlexBasic or FlexOne.
• You must be aged at least 16 years or older to open the saver.

How can I earn £337 by moving to Nationwide? 

Providing you qualify for the switch bonus and maximise the £200 regular saver allowance, you could actually bag a total of £337 by moving to Nationwide in the first year of opening the account depending on which current account you pick.

If you save £200 in the saver on the first day of each month, you will earn £104 over the year. 

But, if you open the Nationwide FlexDirect account, you can also earn 5% AER on bank balances up to £1,500, fixed for 12 months. 

To qualify, you will need to pay in at least £1,000 per month. After 12 months the rate will drop to 1% AER. 

If you take advantage of Nationwide’s switching offer (£200), save £200 per month in the 8% regular saver and keep a balance of £1,500 in the Nationwide FlexDirect account for one year, you could earn £377. 

It has been a challenging few years for the UK banking sector after valuations took a hit in the aftermath of the Brexit referendum, remaining low to this day.

The trend is reflected among UK equities in general, but banking stocks may present an investment opportunity for some investors if, as some believe, they are undervalued.

On the one hand, the surge in interest rates since December 2021 has generally been good news for the sector’s earnings. However, lenders have also had to compete for deposits by offering savers higher rates of interest, and the cost-of-living crisis has threatened defaults on loans.

What’s more, last spring, there was turmoil in the banking sector overseas, and this spooked investor confidence. In Europe, the banking giant Credit Suisse collapsed and had to be bought out by UBS. Meanwhile in the US, Silicon Valley Bank, Signature Bank and First Republic Bank all went under. 

Despite concerns around contagion, this did not develop into a 2008-style banking crisis and UK banks held up. However, the events did not do anything to help valuations. 

Speaking at Loughborough University on 16 February, Bank of England Governor Andrew Bailey noted this very point. 

Reflecting on recent events, he described Covid as the “first big test” for the banking reforms carried out in the wake of the global financial crisis. It is a test that the sector has navigated “effectively”, he said. So, with this in mind, the fact that valuations are still “in the doldrums” is “a puzzle expressed often by banks”, he added.

Against this backdrop, you might be wondering whether now is a good time to invest. Do puzzlingly low valuations present a good investment opportunity, or is the sector set to remain unloved? 

We look at the pros and cons of investing in UK banking stocks, while also highlighting some of the key themes from this year’s results season.

Are UK banks undervalued? 

Reflecting on current market valuations, AJ Bell investment director Russ Mould notes that “all of the FTSE 100 banks trade below book value”. In other words, they are trading at a discount, because the total value of their assets is higher than the market price of the shares.

This suggests that “the market does not believe the asset valuations, or it does not believe they can make a decent, risk-adjusted return on those assets, or a combination of the two”, he explains.

This in itself is not a reason to buy – investors would need to be confident that the market will catch up, realising the inefficiency at the heart of its pricing. 

And while Owen Freshwater, investment manager at Evelyn Partners, acknowledges that “UK banks remain one of the cheapest sectors in the UK stock market”, he thinks that “it is difficult to find a near-term catalyst for the sector”. He highlights concerns about rising loan losses and squeezed margins as two factors that are “weighing down the sector”.

Matt Britzman, equity analyst at Hargreaves Lansdown, is more optimistic though. He believes that “there are several tailwinds yet to play out that could give room for upside beyond current consensus”. 

“With the return of real wage growth, plus a stabilising housing market, consumers should remain resilient”, in his view. “At the same time, banks are seeing easing conditions in the mortgage market and what looks to be a peak in terms of consumers shifting to higher cost savings accounts”, he adds.

With this in mind, he believes that investors should think of banks as being “like a bond portfolio that’s rolling on to higher yields over the next few years”, adding that “Lloyds and NatWest look best placed to benefit from these improving trends”.

Which UK banks should you consider?

The risk associated with banks depends on the lender, so here we break down the key things you need to know about the five major lenders in the UK. HSBC, Lloyds, Barclays, NatWest and Standard Chartered – the big UK-listed banks – share a lot of key features but there are some differences.

HSBC and Standard Chartered are increasingly global businesses with strong focuses on Asia. They are more insulated to some of the domestic problems in the UK, but also exposed to additional risks overseas – most recently challenges in the Chinese economy.

NatWest, Barclays and HSBC all have an investment arm which leaves their shares exposed to higher risk, but potentially higher reward too. Barclays’ investment arm has been in the news recently, for example, with many investors calling for the bank to ditch this part of its business as it has dragged on profits.

We take a look at some of the key themes impacting the five major banks this results season.

Barclays: ambitious plans announced

Barclays announced its 2023 results to investors on 20 February. As part of this, it unveiled a three-year plan to improve its operational and financial performance. 

As well as looking to boost returns to more than 12% by 2026, the bank is planning to cut costs by £2bn. Furthermore, it is looking to return £10bn of capital to shareholders between 2024 and 2026 through dividend payments and share buybacks. 

This news came just over a week after the bank announced its plans to acquire Tesco Bank, further building on its proposition for retail customers. 

The bank also has an investment arm, but some investors are calling for it to focus solely on its retail proposition, with the investment business having dampened profits in recent years.

Commenting on the bank’s recent results, Mould highlights that the bank’s “net asset value per share (NAV) is growing”, adding that this “might be a start in persuading investors that its shares are too cheap, especially given the bumper cash returns”. 

That said, he warns that the bank will need to “keep its nose clean and avoid any fresh litigation and conduct costs”, as well as “keep[ing] loan losses to manageable levels”.

Natwest: retail share sale could offer a discount 

Natwest released its 2023 results on 16 February, revealing strong performance for the year. 

The bank’s pre-tax profits were up 20% compared to 2022, exceeding analyst expectations. This is the highest they have been since 2007. The bank proposed a healthy dividend of 11.5 pence per share, as well as announcing plans to launch a £300 million share buyback scheme in 2024.

Conscious of falling interest rate expectations, the bank has been cautious in its outlook going forward. 

“Unlike Barclays, NatWest have reset expectations and lowered their expectations for the coming years, in part due to fears that falling interest rates could lead to lower returns”, says Freshwater. “Despite this, the dividend remains well covered and they are committing to further buybacks”, he adds.

It also looks like a Natwest retail share offer could take place later this year, with the government looking to sell its 35% stake in the bank. Investors are expecting the government to offer the shares at a discount to their full price to encourage interest, which could create an attractive entry point.

HSBC: challenges in China’s real estate sector 

HSBC also saw its pre-tax profits rise to $30.3 billion in 2023, increasing by 77% compared to the previous year. Despite this, they came in below analyst predictions, marred by challenges in the Chinese economy. The bank has a strong presence in the region. 

Chief executive Noel Quinn highlighted several steps the bank had taken to reward shareholders over the course of the year, including the “highest full-year dividend since 2008, three share buy-backs last year totalling $7bn, and a further share buy-back of up to $2bn”. 

However, investors appear to have focused more on the bank’s challenges in China, with the share price dropping by its biggest amount since 2020 in the wake of the results on 21 February. 

“While the potential for growth is greater [in Asia], the ongoing issues with the Chinese economy, notably in the real estate sector, have led to both [HSBC and Standard Chartered] tak[ing] significant impairments on their loans”, says Freshwater. Until these problems are resolved, he thinks it is “difficult to see a catalyst” for their valuations improving.

Standard Chartered: also exposed to China 

Standard Chartered also reported an increase in profits when it released its results on 23 February. Pre-tax profit jumped by 27% to $5.7bn. 

“We have increased full year dividends, up 50%, and have announced a new $1bn share buyback, bringing our total shareholder distributions to $5.5bn since January 2022”, CEO Bill Winters also outlined. 

Like HSBC, though, the bank also reported losses related to its Chinese real estate portfolio.

Lloyds: embroiled in car finance scandal

Lloyds released its 2023 results on 22 February, reporting pre-tax profits of £7.5 billion. This was a 57% increase compared to the year before, and slightly exceeded analyst expectations. 

The company also announced a dividend of 1.84 pence per share, and a share buyback programme of up to £2 billion. 

Despite this, the news was overshadowed by the bank putting aside £450 million for potential customer redress. This is in light of the latest customer protection scandal. Lenders are currently preparing for a regulatory review into the mis-selling of car finance.  

“[T]he FCA’s motor finance review [is] likely to lead to compensation akin to the PPI scandal”, says Freshwater.

Should you invest? 

With all of this in mind, does the sector present an attractive investment opportunity? In short, it depends on what you are looking for. 

A common theme across all of the banks this results season has been returning capital to shareholders, both in the form of generous dividends and share buyback schemes. So, if you are looking for income generators in your portfolio, the sector could be worth considering – particularly given that you can currently buy banking stocks up cheap.

Responding to the Barclays release earlier this month, Mould wryly commented, “Maybe banks are going to come back into fashion after all, if only because they start to function as cash machines rather than operate them”.

The dividend yield across the five major banks is as follows:

Source: Morningstar Direct as of 23 February 2024.

One thing to bear in mind is that interest rates are forecast to fall later this year, with inflation now coming under control. This could mean that the sector’s earnings are not as strong going forward as they were in 2023. 

Furthermore, if you are looking for growth, you might be better off investing elsewhere. There are no guarantees that investors will realise the valuation discount on banks any time soon, so prices could stay deflated.

The regional and regulatory challenges faced by some of the individual names are also something to keep an eye on, if you are considering investing.  

If you want exposure to the sector without putting all of your eggs in one basket, holding a small amount across several banks could be a better strategy than taking a larger stake in just one. 

The Financial Conduct Authority (FCA)  has told some of the country’s biggest banks to boost progress on improving savings rates for customers amid accusations of profiteering. 

Currently, the top savings accounts are offering rates of up to 7% for existing customers, but the industry average is well below this.  

Following a meeting with bank bosses, including those from HSBC, Barclays, Lloyds and NatWest, the regulator said the lenders recognised they “needed to do more to help their consumers access the best rates.” 

But Sheldon Mills, FCA executive director for competition, said "It's not for me to set rates for banks." 

Banks under pressure due to low savings rates 

Despite the soaring cost of loans and mortgages, banks have been attacked for not passing higher interest rates onto savers. 

According to Moneyfacts, the average two-year fixed mortgage rate is 6.52%, with the savings rate on offer from some high street banks well below that figure. Despite increases in recent days, the average one-year fixed savings rate is 4.83%.

The FCA said: “We have started to see some positive action by banks and building societies to improve their rates, and to ensure their customers are benefiting from better value products. We now want to see that progress accelerate.”

The meeting comes ahead of the Consumer Duty roll out - a new string of regulations the FCA said will “put consumer interests at their heart… to ensure their customers are benefiting from better value products.”

High street banks are also facing pressure from MPs. Earlier this week, the cross-party Treasury Committee wrote to the banks asking whether they believe all their savings rates “provide fair value” to customers. 

Dame Angela Eagle, a member of the Treasury Committee, said: “This blatant profiteering has been shocking, and it’s clear to me this behaviour is miles away from the incoming requirement for firms to treat their customers fairly and with respect.”

"With interest rates on the rise and our constituents feeling squeezed by rising prices, it is only right that the UK's biggest banks step up their measly easy-access savings rates," Harriett Baldwin, chair of the committee, said in a statement. 

Banks boost rates in response

The good news is, banks seem to be getting the message. Ahead of the meeting with the FCA, HSBC unveiled a 0.65% increase on Fixed Rate Saver accounts  - its one-year Fixed Rate Saver increased to 5.05% and two-year Fixed Rate Saver is now 5.1%.

Lloyds is also boosting its rates across its Fixed Rate Cash ISAs from 12 July. Its one-year fix will increase by half a percentage point to 5.45%, with its two-year fix rising to 5.5%.

But any reprieve in cash savings rates is “being drowned out by the stubborn persistence of high inflation,” said Myron Jobson, senior personal finance analyst at interactive investor. 

“Those who can afford to put money away for five years or more should consider investing for the potential of long-term inflation-beating returns that far outstrip savings rates,” he said.

Compounding the problem is the issue of inertia, with many savers not shopping around for better rates. £250 billion is sitting in bank and building society accounts paying no interest, while £945 billion is in instant access accounts.

At the same time, banks are recording booming profits. 

NatWest reported a 50% bump in profits during the first quarter of 2023 to £1.9bn, while Lloyds filed a pre-tax profit of £2.26 billion, up 46.4% year on year. Barclays reported pre-tax profits of £2.6 billion, up 27%. HSBC meanwhile tripled its quarterly profits to $12.9bn.

In a statement issued alongside its quarterly report, HSBC said the surging profits were a result of “higher net interest income in all of our global businesses due to interest rate rises.”

Bank bosses have been summoned to a meeting with the financial watchdog to discuss concerns surrounding interest rates for savers lagging behind the cost of mortgages.

The Financial Conduct Authority (FCA) expects chief executives from HSBC, NatWest, Lloyds and Barclays, as well as from smaller lenders, to attend on Thursday amid allegations of “blatant profiteering”.

Higher interest rates have resulted in banks increasing mortgage rates sharply, yet savings rates are not rising at the same pace. 

The average easy access savings rate today (5 July) is 2.48% while the average 1-year fixed savings rate is 4.80%, according to Moneyfacts. 

Meanwhile, the average 2-year fixed residential mortgage rate is 6.51% and the average 5-year fixed residential mortgage rate is 6.02%.

The Bank of England raised its base rate to 5% last month and further increases are now expected.

Chancellor Jeremy Hunt has said it is an “issue that needs solving” amid households struggling with the cost of living crisis.

But sources were playing down the likelihood of a charter being drawn up in the vein of the one agreed between Chancellor Jeremy Hunt and the big mortgage lenders.

Meanwhile, Rishi Sunak said the Financial Conduct Authority (FCA) wanted to deliver “better deals for savers”.

The Prime Minister told the Commons Liaison Committee: “What the Chancellor said is the issue needs to be resolved.

“I know that he has met recently with the FCA and they have agreed to deliver better deals for savers by driving competition and increasing reporting, which I think they are doing in the next few weeks, in particular, to make sure that savers are benefiting from higher interest rates.

MPs on the Treasury Committee were stepping up their campaign to increase saving rates for lenders, which are failing to keep up with soaring mortgages.

They wrote to the four biggest lenders demanding answers to their concerns that saving rates are “too low” in the light of the base interest rate reaching 5%.

Dame Andrea Leadsom, the former Cabinet minister who sits on the committee, said that “it’s quite clear they have failed to pass on the rise in interest rates to savers”.

Colleague Dame Angela Eagle added: “This blatant profiteering has been shocking, and it’s clear to me this behaviour is miles away from the incoming requirement for firms to treat their customers fairly and with respect.”

From the end of July, a new consumer duty will be introduced to force financial firms to put consumers at the heart of what they do.

THE BEST SAVING RATES

Even though returns on cash savings accounts are still negative in real terms as inflation at 8.7% eats away at even the most competitive savings rates, if you have cash lingering in an account that pays a poor return, then here’s where you can shift your money to to get a boost.

The best easy-access savings account pays 4.21% from Chip Instant Access Saver. It is only available to existing customers and managed in-app.

The best savings account for existing customers is First Direct’s Regular Saver that pays 7% for 12 months. Monthly savings are limited to a maximum of £300.

Meanwhile, the best one-year fixed savings account is with My Community Bank and pays 6.03%. It has a minimum deposit of £1,000.

For more on savings rates, see our Best savings accounts July 2023. 

The Treasury Select Committee has grilled the bosses from the UK’s “big four” largest banks over why savings rates are so low, despite Bank of England base rate sitting at 4%.

Barclays, Lloyds, NatWest and HSBC were questioned by the cross-party committee on a wide range of issues, including savings rates, mortgage rates, bank branch closures, changes to financial regulations and even how homeowners in flood-risk areas are treated.

The committee of MPs said it was important to explore whether banks are boosting their profits by increasing the gap between the interest paid to savers and the interest paid by borrowers.

For example, variable-rate mortgage holders were paying over 4% interest at the end of 2022, up from 2% at the start of the year, according to Bank of England data. But the interest earned by savers with fixed-rate cash ISAs only rose from 0.5% to 1% in the same period.

The measly rise in savings rates by some of Britain’s biggest banks is at odds with the big rise in base rate, which has soared from a record low of 0.1% to 4% in just 14 months.

As the committee noted: “Customers of Barclays, HSBC, Lloyds Banking Group and NatWest Group can expect to earn between 0.5% and 0.65% interest on basic savings accounts. MPs on the committee will ask why these rates are so low, and whether banks can be doing more to advise customers on how to arrange their funds to maximise the return they receive.”

Harriett Baldwin, chair of the Treasury Committee, added that “public scrutiny of our largest financial institutions is vital” and that it was important to question the leaders of the UK’s biggest banks “on issues of fundamental importance to our constituents”.

Customer inertia over savings accounts

The committee asked the bank bosses whether they rely on customer inertia over moving to better products.

The Evening Standard reported that Matt Hammerstein, chief executive at Barclays UK, replied: “I definitely refute the idea that we rely on inertia, I don’t think that’s in any way representative of the way we design products or the way we engage customers.”

Meanwhile, Ian Stuart, chief executive of HSBC UK, said: “We actively reach out to customers. Five and a half million emails went out recently to customers… we’re actively trying to bring customers on to the good savings products that we’ve launched.”

“I would argue the vast majority of our customers do shop around.”

Lloyds Banking Group chief executive Charlie Nunn told the hearing: “When you look at instant access savings, we see between 5% to 7% of all of our balances churning – moving between our competitors – every month. So it’s one of the most actively moved products or services that we have.”

Mortgage rate volatility

The bosses were also asked about the mortgage market after rates jumped last autumn amid market volatility.

According to the Evening Standard, Alison Rose, chief executive of NatWest Group, said there was “huge disruption during the mini-Budget when we saw gilts and the swap rate grow very quickly”.

She added that, while mortgage rates are coming down, the bank is helping customers look at their balance sheets “and find the right answer for them”.

The average two-year fixed-rate mortgage is now 5.79%, according to the data provider Moneyfacts. In December, the average rate was 6.01%.

Bank branch closures

There has been a string of bank branch closure announcements recently, and the MPs were keen to find out the extent to which access to cash is impacted by branch closures.

Lloyds and Halifax recently announced they would close a further 40 branches this year, while Barclays said it would shut another 15 branches. Last year, HSBC said it would shut the doors to 114 branches from April 2023.

Ian Stuart at HSBC told the committee the bank was “absolutely committed to a physical footprint in the UK”.

He added: “We think it’s important, but we have to get it scaled properly for the long term.

Stuart said 98% of HSBC’s transactions in December were digital.

Charlie Nunn at Lloyds Banking Group told MPs: “We remain very committed to our branch network.”

Alison Rose at NatWest Group said the bank was seeing “significant shifts in customer behaviour”, adding: “But we recognise we need to look after all of our customers and make sure that we support particularly vulnerable customers.”

The committee also discussed the government’s ‘Edinburgh Reforms’ to financial services, with the chief executives giving their views on plans to relax the ring-fencing regime, which separates retail from investment banking.

Meanwhile, the MPs voiced concern about how homeowners living in a flood-risk area were treated, for example in terms of insurers doing risk assessments and mortgage providers carrying out valuations.

Why haven’t savings rates kept pace with Bank rate increases?

While the Bank of England base rate acts as a guide to banks and building societies over whether they should change their savings rates, there is a stronger force at play: what their competitors are doing.

“No bank is going to hike rates dramatically above the highest rival, as they only need to nudge it slightly over their competitor’s offering to win business,” explains Laura Suter, head of personal finance at the investment platform AJ Bell.

She adds: “On top of this, banks are very keen to protect their profits, which comes at a cost to UK households. While mortgage rates have shot up, savings rates haven’t risen by nearly as much and some banks are worse than others for pocketing the difference rather than boosting savings rates. Banks make money on the difference between what they charge those borrowing money and what they hand over to savers – the bigger the difference, the bigger the profits.

“Banks are also concerned about what’s coming in the rest of the year. A recession means people losing their jobs, which in turn means more people defaulting on their mortgage or other debt, which is a cost for banks. A similar trend will be seen in the commercial market, with businesses defaulting on loans. Many banks are preparing for a wave of defaults and trying to shore up their balance sheets in anticipation.”

How to get the best savings rate

According to Suter, lots of people stashed away cash during the pandemic and many are still sitting on these cash pots, often in their current account or in old savings accounts paying very little interest.

Even if your savings rate was one of the best a year ago, it probably isn’t now, and it pays to shop around.

As Bank rate has risen over the past year, there has been something of a savings war, especially among challenger banks and building societies.

If you hunt around for a better deal you can get more than 3% for easy-access, up to 7% for regular savings and more than 4% for a one-year fixed-rate account.

Check out our round-up of the best savings accounts on the market.

Suter says savers are starting to vote with their feet. “The latest Bank of England figures show that in the final two months of 2022, savers took £7.7bn out of easy-access accounts paying little or no interest and at the same time funneled £17.3bn into fixed-rate accounts, where rates have shot up.”

If you're looking for the best savings rates, you can earn up to 5% with the top easy-access account, 4.85% with a one-year fixed bond, 8% with a top regular saver or 4.72% with a cash ISA.

While savings rates are lower than they were a few years ago, you can still find inflation-beating deals on the market and make your money work hard for you.

You shouldn’t judge a savings account solely by its top rate, but rather check whether it fulfils your needs – both short-term and in the long run. This includes looking at whether there are any restrictions on withdrawals or bonus rates, which could mean the rate quickly drops when the boost comes to an end.

The Bank of England held interest rates in April, so there's a chance that the top savings deals start to tumble. In that case, if you want a competitive rate on your cash, you may need to act quickly.

Below, we look at the top rates for notice savings, easy-access savings, fixed bonds, regular savings and cash ISAs.

Note:
All the banks we mention in this article are protected by the Financial Services Compensation Scheme, meaning up to £120,000 of your savings are protected should a bank or other financial services company go out of business.

Best notice savings rates

The best easy-access savings rates

Best regular savings accounts

The best one-year fixed rates

The best two-year fixed rates

The best three-year fixed rates

The best easy access cash ISAs

The best one-year fixed rate cash ISAs

The best two-year fixed rate cash ISAs

The best three-year fixed rate cash ISAs

Types of savings accounts

There are several different types of savings accounts to choose from.

• Easy access savings accounts: These allow you to take your money out as and when you please. However, some come with restrictions on withdrawals, which can mean you can’t immediately access all of your money in the account in an emergency. For instance, you may only make same-day withdrawals if done before a particular timeframe, or you may only be permitted a limited number of withdrawals before the rate on your account drops.
• Fixed-rate savings accounts: These come with restrictions, so you can’t access your cash until the account reaches maturity; otherwise, you may face a hefty penalty. You usually earn more interest if you are willing to lock your cash away for a fixed period, but keep in mind that this also takes away flexibility should you need the cash suddenly. Here's how much you should have in emergency savings.
• Regular savings accounts: Regular savers reward customers who are ready to commit to a consistent savings habit. These are usually the top-paying savings rates in the market, but can also come with withdrawal restrictions and are usually fixed for a certain time. We look at whether easy access or regular savings accounts give you the best return in a separate piece.
• Individual savings accounts (ISAs): These are a type of ‘tax wrapper’ into which you can put cash or investments. Currently, you have a £20,000 limit on how much you can set aside into an ISA. We look at how many ISAs you can have in a separate guide.

If you aren’t saving in this type of account, you could be forced to pay tax on interest. We look at ways to shelter your money from the savings tax trap.

If you’re looking to switch your current account, take a look at our guide to the best bank switching offers, where you can earn as much as £250.

What is the maximum amount protected by the Financial Services Compensation Scheme (FSCS) in the UK?

The Financial Services Compensation Scheme (FSCS) protects up to £120,000 of your savings and investments if a financial institution goes bust.

Previously, the limit was £85,000 for sole accounts and £170,000 for joint accounts, but it was raised to £120,000 and £240,000 respectively in December 2025.

All accounts listed above are eligible for FSCS protection. You can check if your account is protected online on the FSCS website.

What is the current Bank of England base rate?

The current Bank of England base rate is 3.75%. Interest rates were held at 3.75% in June. The next decision from the Bank of England will be announced on 30 July 2026.

The central bank’s Monetary Policy Committee meets eight times a year to set rates.

This article is updated regularly to bring you the latest on the best savings rates. Sign up for our newsletter to stay up-to-date on all the latest deals for cash savings.

All the banks we mention are protected by the Financial Services Compensation Scheme (FSCS), meaning up to £120,000 of your savings are protected should a bank go bust.

Cash savers looking for the best regular savings accounts could access rates of up to 8%.

Regular savers, though they typically come with higher interest rates compared to other savings accounts, can also have more restrictions, such as how much you can deposit and access to withdrawals.

On top of that, you'll need to be an existing current account customer to take advantage – but that's not the case for all of the banks and building societies.

We round up the top regular savings accounts to help you pick one that suits your needs. If you're looking for the best easy access savings accounts and fixed-term savings accounts, we explore them in separate guides.

Meanwhile, if you want to make the most of your tax-free savings, the best cash ISAs can help you grow your money.

The best regular savings accounts

Zopa Regular Saver – 7.1% AER

What’s the deal?

With Zopa Biscuit, customers can unlock an attractive savings rate of 7.1% if they deposit up to £300 per month. It's currently the top deal on the market. Savers can also earn 2% on all balances and 2% cashback on direct debit bills worth up to £1,500 per year. Plus, there are no fees on overseas spending.

Eligibility

You will need to open Zopa’s Biscuit current account to access the exclusive regular saver rate of 7.1%. The account can be opened by downloading the Zopa Bank app.

We explore whether the Zopa Regular Saver is worth getting.

The Co-operative Bank Regular Saver – 7% AER

What’s the deal?

The Co-operative Bank is offering a rate of 7% AER. The account will mature after one year, but the rate is variable, which means it could change throughout this period. You can save up to £250 a month. You have the freedom to withdraw money when you like.

Eligibility

There are no eligibility restrictions. This account can be opened either online or in branch. Read more about whether the Co-op regular saver is worth it.

First Direct Regular Saver – 7% AER

What’s the deal?

First Direct pays 7% if you deposit between £25 and £300 per month into the account.

Eligibility

To benefit from the 7% rate, you must be a First Direct current account holder. The rate will only be available for 12 months, after which it may drop.

Tipton & Coseley BS 125 Anniversary Regular Saver to 31 July 2027 – 7% AER

What’s the deal?

Tipton & Coseley is offering a limited-edition saver to celebrate 125 years of the bank. You can earn a variable rate of 7% on your savings if you deposit up to £125 per month. The balance must be sent within 14 days of opening the account, and interest is paid at maturity and on 31 July 2027. The account can be opened in a branch and managed either in person or via post.

Eligibility

The variable rate is only for new customers and those with a B, DY, WS or WV postcode.

Nationwide Building Society Flex Regular Saver – 6.5% AER

What’s the deal?

There is no monthly minimum deposit, and you can save up to £200 per month. The account allows up to three withdrawals. On your fourth withdrawal, the rate on the account will drop to 1.05% (variable) for the rest of the term. You can get access to Nationwide’s 6.5% AER regular savings account when you open a current account with the bank. Read more on what to do if your 6.5% Nationwide regular saver is maturing.

Eligibility

There are no eligibility restrictions.

Virgin Money Regular Saver Exclusive – 6.5% AER

What's the deal?

You can save up to £250 a month and earn a fixed rate of 6.50%. The rate is fixed until 30 June 2027. Interest is paid annually. The account can be opened online or at a branch.

Eligibility

There are no eligibility restrictions.

Hanley Economic BS 1 Year Branch Smart Saver – 6.3% AER

What's the deal?

This variable regular saver is returning 6.3%. You need to pay in between £25 to £300 per month. You can withdraw penalty-free twice per tax year. You can open the account in a branch and it can also be managed via post.

Eligibility

There are no eligibility restrictions.

Lloyds Bank Club Monthly Saver – 6.25% AER

What’s the deal?

Lloyds Bank is offering 6.25% on a maximum deposit of £400 per month. To give some certainty, the rate is fixed for one year. If you want flexibility with your cash, this account has no restrictions on withdrawals. After one year, your account will become a standard saver.

Eligibility:

This account is only for Club Lloyds or Lloyds Premier current account holders who haven't already opened a Club Lloyds Monthly Saver in the last 12 months.

Earl Shilton BS Monthly Saver – 6% AER

What's the deal?

You can deposit up to £500 per month – more than once – in this monthly saver from Earl Shilton Building Society. Note that this account can only be opened in a branch. Interest is calculated daily and compounded annually on the last day of February. Only two withdrawals are permitted per calendar year.

Eligibility:

There are no eligibility restrictions.

Harpenden BS 18-30 Regular Saver – 6% AER

What's the deal?

You can earn 6% with Harpenden’s new 18-30 Regular Saver if you deposit between £10 and £200 each month. You can make unlimited withdrawals. The account can be opened online. Interest is paid on maturity.

Eligibility:

As the name suggests, you need to be between the ages of 18 and 30 years old at the time of application.

Mansfield BS My Milestone Saver – 6% AER

What's the deal?

You can save up to £500 per month in Mansfield's My Milestone Saver. The interest rate includes a variable 2.75% bonus for the first 12 months, after which the rate reverts to 3.25%. You can only make one penalty-free withdrawal per calendar year. The account can be managed in a branch or via post. Interest is payable annually.

Eligibility:

There are no eligibility restrictions.

Monmouthshire Building Society Regular Saver – 6% AER

What’s the deal?

Monmouthshire Building Society is offering a variable 6% on a maximum deposit of £500 per month. It can either be a sole or a joint account. You can open it online or in a branch. Interest is calculated daily and paid when the 12-month term ends.

Eligibility:

This account is not available if you live in Northern Ireland.

Market Harborough Building Society Fixed Term Regular Saver – 5.75% AER

What’s the deal?

With monthly deposits of between £10 and £250, this account will allow you to earn interest of 5.75% on your savings. Even with a penalty, you cannot make early withdrawals. The account matures on 31 March 2027. You can open the account in a branch.

Eligibility

There are no eligibility restrictions.

Vernon Building Society Online Regular Saver – 5.75% AER

What’s the deal?

Vernon Building Society offers 5.75% variable for those who save between £25 and £250 per month. The rate is variable, and no withdrawals are permitted. If you need to access your account urgently, you can close the account without notice or penalty. The account can be opened online via the website.

Eligibility

The account is only available for those who live in the following postcodes: BL, CH, CW, M, OL, SK, WA or WN.

How does a regular savings account work?

Compared to other types of savings accounts, there are more caveats to consider when opening a regular savings account. Here's what you should look out for.

• Existing customers – Most regular savers offer the best rates to their existing customers, so you may need to have a current account to get the rate.
• Monthly payments – To receive the best rates, a lot of regular savers ask for a minimum payment, which can be as low as £10 per month. There is also an upper limit, so the amount you can save is restricted.
• Your cash is protected – The Financial Services Compensation Scheme (FSCS) protects all of the banks mentioned in our best regular savers on balances up to £85,000. It’s a good idea to spread your money across your current accounts and savings to ensure you don’t have more than the higher limit in any one account.

If your local bank or building society branch has closed recently - or is set to close soon - you’re not alone.

While you can switch bank accounts to find one that has a branch near to you, it is certainly getting harder to tick that box.

Thousands of bank branches have closed in recent years. Lloyds and Halifax recently announced they would close another 40 branches this year, while Barclays said on Saturday it would shut another six branches. Last year, HSBC said it would close 114 branches from April 2023.

The banks say demand has fallen as more as more customers do their banking online and that customers can also use any of the Post Office’s 11,635 branches to carry out most banking tasks.

As branches close, you may see a new “banking hub” pop up in your local area, which allow people from different banks to deposit and withdraw money - we explain below where to find the six which have recently opened. 

We explain how banking hubs and banking pods work, where the new banking hubs will be, and what the alternatives are if your local branch has closed and you still want face-to-face banking.

What is a banking hub?

Banking hubs allow customers from different banks to deposit and withdraw money. They offer a counter service operated by the Post Office, where customers of all major banks and building societies can carry out regular cash transactions, Monday to Friday.

The hubs also provide dedicated rooms where customers can see community bankers from their own banks to discuss more complicated banking issues. The community bankers work on rotation, with a different banking provider available on each day of the week.

In total, there are plans to create 62 hubs, but only six have opened so far. These are in:

• Brixham (Devon)
• Cambuslang (South Lanarkshire)
• Cottingham (East Riding of Yorkshire)
• Rochford (Essex)
• Troon (South Ayrshire)
• Acton, London

The ATM network operator, Link, has also recently announced locations for eight banking hubs:

• Downham Market (Norfolk) 
• Shirebrook (Derbyshire) 
• Otley (West Yorkshire) 
• Sidmouth (Devon) 
• Newton Aycliffe (County Durham) 
• Porthcawl (Bridgend) 
• Withernsea (East Yorkshire) 
• Wellington (Somerset) 

 It is unknown when these particular eight banking hubs will open. We’ll update this article when we know more. 

“Access to cash and face-to-face banking services continues to be important for millions of people across the UK. Not everyone can or is able to go digital yet, so we’re pleased to announce new cash services to support these communities,” said John Howells, chief executive of Link.

Link also announced the planned introduction of cash deposit machines in Keswick in Cumbria, Ripley in Derbyshire, Littlehampton in West Sussex, Whitstable in Kent, Dagenham in Greater London, and Colwyn Bay in Clywd.

There are plans for 38 new deposit services around the UK, where consumers and businesses can deposit cash without having to visit a bank branch.

On top of that there are plans for three fee-free ATMs to open up soon in areas where banks are closing down along with their ATMs. These will open in:

• East Horsley (Surrey)
• Newburn (Newcastle) 
• Ystradgynlais (Powys) 

What is a banking pod?

Barclays has announced it will launch a string of “banking pods” in response to changing customer needs.

The pods are purpose-built, semi-permanent structures in locations such as shopping centres and retail parks. They will provide a dedicated, private space, and can be moved depending on demand.

The pods differ to the shared banking hubs mentioned above, as the pods are only for Barclays customers.

At least 10 pods will be rolled out across the UK by summer 2023 following the success of the bank’s first one in St Austell.

The bank has not yet revealed the locations for the pods, but it says some of them will be areas without an existing Barclays presence.

In addition, six electric vehicle banking vans will be added to Barclays’ existing fleet of 10, enabling the bank to reach customers in remote locations.

The bank also said it is expanding its scheme where it works with local councils and communities to arrange a presence in places such as town halls and libraries.

“Our new banking pods and community pop-ups help us to tailor our in-person support for each location, including support with digital skills. In areas where we close a branch, we will maintain our presence in that community offering an alternative face-to-face solution,” said Jo Mayer, head of everyday banking at Barclays UK.

“They must be rolled out far more quickly”

Critics say banking hubs, pods, vans, pop-ups and any other types of temporary branches all need to be introduced quicker into communities struggling with a lack of banking services.

Jenny Ross, editor of Which? Money, said: “Cash remains hugely important for a significant minority who use it to pay for everyday essentials and keep track of their spending as the cost of living crisis goes on, yet banks such as Barclays continue to close hundreds of branches, making it harder for people to deposit and withdraw it.

“Proposals to plug gaps left by bank branch closures may well be part of the solution to protect access to cash, but must be rolled out in much larger numbers and far more quickly in order for people to feel their benefits.”

According to research by Which? last year, almost a quarter of free-to-use ATMs have vanished since 2018, while 4,685 bank branches have shut their doors - meaning almost half of the UK’s bank branches have closed since 2015.

My bank branch has closed. What are my options?

If your local branch has closed, check to see if there is a shared banking hub near you, or if your banking provider has any community pop-ups. As well as Barclays, TSB also runs pop-ups for its customers, such as in libraries, town halls and churches.

If you have a Post Office near you, you may be able to use its banking services, such as withdrawing cash, depositing cash and cheques and checking your account balance, Customers of Halifax, Lloyds, TSB, Allied Irish Bank, AIB, Bank of Ireland, Bank of Scotland and Virgin Money can access the full range of manual and automated banking services at a Post Office. Other customers may only be able to use certain services.

There’s a handy table on the Post Office website showing which personal services and which business services are available to which banking customers.

Another option if you want to withdraw money and there’s no bank branch, Post Office or ATM near you is to get cashback in a shop. Some supermarkets and convenience stores offer cashback at their tills with your debit card - and you don’t need to buy anything. Type your postcode into the Link website to see your options.

Finally, you could switch to another bank or building society that does have a local branch (although be aware there’s no guarantee this won’t close too).

Changing current account could mean you find one that is better suited to you, for example, offering cashback on bills, an interest-free overdraft and/or a decent savings rate. Look out for banks offering a switching bonus, as this means you’ll bag some free cash too.

Wondering what to do with old £20 notes and £50 notes? While paper notes ceased to be legal tender in 2022 and can no longer be used for everyday transactions, you can still exchange them for the same value in polymer notes.

It’s worth checking any unused bags, wallets and even your children’s money boxes for old notes that are no longer in circulation.

We look at what to do with old £20 and £50 paper notes and where to exchange them.

Are paper notes still legal tender in the UK?

No, paper notes stopped being legal tender in October 2022 when they were withdrawn from circulation and replaced with polymer notes.

A spokeswoman from the Bank of England told the BBC that “all genuine Bank of England banknotes that have been withdrawn from circulation retain their face value” and there is “no expiry on the period in which we will exchange banknotes”.

What is legal tender?

According to the Bank of England, the term ‘legal tender’ means that if you offer to fully pay off a debt to someone in a form considered to be legal tender – without any contract specifying another form of payment – you cannot be sued by anyone for failing to repay the debt.

In simple terms, it’s the officially recognised money by law that works as a means to settle a debt or meet a financial obligation. It tends to be the national currency of a country, per Investopedia.

What counts as legal tender in the UK?

If you live in England and Wales, then Royal Mint coins and Bank of England notes are considered legal tender.

In Scotland and Northern Ireland, Royal Mint coins are accepted as legal tender – but not the English banknotes. Both Celtic nations have their own banknotes, issued in the two countries by authorised banks.

As for coins, it’s slightly complicated. For instance, 1p and 2p coins count as legal tender for any amount up to 20p, while 5p and 10p coins are for any amount up to £5. £1 and £2 coins are acceptable for any amount.

You will also find that most of the common payment methods, like debit or credit cards, contactless payments, or paying by cheque, are not legal tender. We look at how to pay with a cheque in a separate guide.

Where can I exchange old banknotes?

There are various places you can take old £20 and £50 paper notes. Depending on where you live, some locations may be easier to access than others.

It’s also worth noting that you won’t receive the next series of banknotes featuring British wildlife just yet – replacing historical figures like Winston Churchill and Jane Austen for the first time in over half a century.

Instead, you’ll receive current polymer banknotes featuring King Charles III or the late Queen Elizabeth II, as they remain legal tender.

At the Bank of England

One option is to take the old paper notes to the central bank.

There is currently no time limit when it comes to exchanging your old UK banknotes at the Bank of England. However, you may need to present an original photo ID and proof of address when exchanging notes.

You can do this in two ways:

• In-person: You can swap your old notes at The Bank of England Counter, on Threadneedle Street, London. The counter is open between 9:30am and 3pm on weekdays (excluding bank holidays). Do be aware – even though the last entry is at 2:45pm, you may not be served if it has reached capacity after midday.
• By post: This is done at your own risk, and you may want to insure yourself against loss before sending banknotes in the post. The Bank of England website states that they are currently taking up to 90 working days to process postal banknote exchanges – so this method is only suitable if you don’t need the cash in a hurry. You’ll need to fill in a postal exchange form and send photocopies of your proof of ID and proof of address if you’re exchanging more than £700. It’s also worth tracking your post as the bank states that it cannot confirm receipt of postal exchanges.

At the Post Office

There are 53 Post Office branches across the UK that will let you swap your old banknotes for new polymer ones – even if you don’t have a bank account.

These are the notes you can exchange at a Post Office:

• £5 note – ceased to be legal tender on 5 May 2017
• £20 note – ceased to be legal tender on 30 September 2022
• £10 note – ceased to be legal tender on 1 March 2018
• £50 note – ceased to be legal tender on 30 September 2022

You can exchange up to the value of £300 every two years. You will need to show a form of photo ID so that the Post Office can keep track of how much you exchange and that you do not exceed the limit.

Valid forms of photo ID include your passport, driving license or a national identity card.

Find all the participating Post Office branches where you can exchange old notes.

At a bank or building society

Different banks have their own rules in place covering how they will handle paper banknotes. While some are happy to exchange them for new polymer notes, others are not so understanding.

Banks and building societies happy to exchange the old notes include Halifax, Lloyds Bank, Nationwide, Barclays, NatWest and Santander.

Banks that let you exchange paper notes will generally allow you to deposit the money into your account with them.

In some cases, you can still exchange the paper notes even if you don’t have an account with that particular bank, for example, with the Bank of Scotland and Virgin Money.

Can I exchange old coins for new ones?

Old £1 coins were demonetised in 2017, but you are still able to exchange them for new ones. We look at what to do with old £1 coins in a separate guide.

You can do this at your local high street bank, though it is entirely up to the bank whether they choose to accept the old tender. Retail banks which say they accept old coins include: Barclays, Lloyds, HSBC, Nationwide, Santander, and Virgin Money.

You cannot exchange old coins at the Bank of England. You can exchange your old coins at the Post Office, so long as they are in good condition.

Can I sell old notes and coins online?

You may find that some of your old notes and coins sell for more than their face value if they are part of special limited runs.

The Royal Mint issues gold coins, primarily for investment purposes, which you can also buy.

If you have a collectable coin, then you might decide to list it online on e-commerce platforms like eBay or Facebook Marketplace, or by selling it to a dedicated reseller. You could find that your old coins could be worth far more than you expect – here’s how to spot valuable coins.

However, just because coins are listed as rare on online marketplaces doesn’t mean they are worth that much money. The price of rare coins is determined entirely by the market, and a sale is contingent on finding a willing buyer.

It is entirely legal for you to sell your old coins online or to a reseller, but make sure you do your due diligence to ensure you are not scammed. It is a good rule of thumb to use reputable platforms and insure your items.

If you’re planning a holiday abroad or often go on business trips, using the best cards for travel could help you make your funds go further.

There are many ways to save on holiday, whether it’s booking flights or buying travel money in advance.

But thinking about how you’ll pay for things on your trip is also important, as the wrong card could see you stung with high exchange fees.

You can avoid these charges by using a competitive travel card that comes with zero fees on foreign transactions. We have compiled a list of the best cards for travel abroad, and the host of perks they offer.

Best credit cards for travel abroad

If you are using a credit card, make sure you are in a position to pay off your bill in full at the end of each month. Otherwise, any interest charges will cancel out any benefits.

Lloyds Ultra Credit Card

This card from Lloyds comes with a low APR rate and there is no cap on how much cashback you can earn.

• 1% cashback on all card purchases in the first year, 0.25% after
• No foreign exchange fees or ATM withdrawal fees
• Representative APR and purchase rate of 12.9% (variable)

Barclaycard Rewards Card

• No fees on purchases abroad if paid in full
• 0.25% cashback on everyday spending
• No interest on cash withdrawals if paid in full
• Representative APR and purchase rate of 28.9% (variable)

NatWest Travel Reward Credit Card

• 1% cashback on eligible travel spending
• Or up to 15% cashback at select partner retailers
• Or 0.1% back on all other spending
• No foreign transaction fees on purchases abroad
• 3% fee on ATM withdrawals (minimum £3)
• Representative APR and purchase rate of 27.9% (variable)

Virgin Money Travel Credit Card

• 1% cashback on spending for the first 90 days, 0.25% cashback after that (up to £15 cashback per month)
• No foreign exchange fees overseas
• Representative APR 27.9% (variable)
• Up to 15% additional cashback with select retailers
• ATM withdrawal fees of 5% applies plus interest charge until repaid in full

Santander Edge Credit Card

• 1% cashback (max £10 per month) on all purchases
• No foreign exchange fees on purchases overseas if spent in local currency
• £4 monthly fee
• Overseas ATM withdrawals have a 3% fee (minimum £3)
• Representative APR 37.8% and purchase rate 29.9% (variable) until fully repaid

If you are applying for a credit card, always go through an eligibility checker, like the Card Match tool from our sister site Go.Compare.

We look at the best American Express credit cards and the best credit cards for airport lounge access in separate guides.

Best debit cards for travel abroad

We look at some banks that do not charge fees when using your debit card abroad. However, there may still be ATM withdrawal fees, often set by the ATM provider.

Chase Debit Card

• 1% cashback on eligible spending for the first 12 months (max £15 per month)
• Note: no cashback on overseas spending
• Fee-free spending and ATM withdrawals home and abroad

Chase also gives you access to its 2.25% (variable) easy access saver. However, the interest rate is quite low, so it’s worth checking out our best easy-access savings accounts guide for the top-paying accounts.

First Direct Debit Card

• Fee-free spending abroad
• Fee-free ATM withdrawals abroad, up to £500 per day
• £250 interest-free overdraft

You could get a £175 bank switching bonus for moving your current account to First Direct, and access a 7% regular savings account.

Starling Bank Travel Money Card

• No fees on spending abroad
• No fees on cash withdrawals abroad
• Manage in-app and online
• Maximum £300 ATM limit and six withdrawals per day while abroad

Monzo Debit Card

• Fee-free spending at home or abroad
• 0% interest on purchases over £100 or more paid over three months
• Otherwise 29% APR representative (variable) for up to 24 monthly payments

Make cash withdrawals of up to £200 outside of the EEA every 30 days for free. Anything over that incurs a 3% charge. You can also earn 2.75% AER (variable) with an Instant Access Savings Pot.

Cashback credit cards give you rewards on your everyday purchases, paying you a percentage of what you spend. If you pay off your statement in full every month, these cards can help you earn hundreds of pounds worth of rewards each year.

The rewards you earn can build up over time, but make sure you pay off your balance in full, otherwise interest charges may outweigh the perks.

These cards usually come with a cap on the amount of cashback you can earn, and note that some have a monthly fee.

We look at the top credit cards for cashback to help you make the most of your spending.

What are the best cashback credit cards?

How do cashback credit cards work?

If you have a credit card that gives you cashback at a rate of 0.5%, for every £100 you spend, you get 50p back. As attractive as the promise of free money sounds, there are downsides, too.

Credit card companies may offer attractive cashback rates for only a fixed period of time, such as the first five months. In order to get the most out of using cashback credit cards you need to be mindful of two things: it may be beneficial to use them for all your spending (but watch out for credit card fees with any purchases) and you must pay off the full amount every month.

The introductory cashback offers could be useful if you know you're going to be buying something expensive. But if you carry a balance over just once, the resulting interest charge could wipe out any cashback you get.

Cashback credit card providers can charge a fee and typically offer uncompetitive interest rates. Some also require a minimum spend before you can generate cashback savings.

As with any credit card, be careful to pay it off in full to avoid being charged interest, and always check the terms and conditions to make sure the card is the right one for you.

Hundreds of mortgage products have been withdrawn after sterling crashed to the lowest levels in decades against the dollar and the Bank of England said it wouldn’t hesitate to step in and raise interest rates further.

Almost 300 mortgage deals have been pulled in the last 24 hours alone, reports The Guardian, with warnings that the base rate could climb to 6% next year.

This is more than double the current base rate, which is 2.25%.

Why are mortgage products being withdrawn?

The halt in new lending comes after UK bonds sold off, driving government borrowing debt costs higher.

“Major mortgage players are hauling in the sails after the wind changed. The dramatic overnight hike in market expectations of future rates has ramped up the cost of doing business, and lenders are taking a break to reassess and reprice”, said Sarah Coles, senior personal finance analyst at Hargreaves Lansdown.

Market watchers have become increasingly concerned about the UK’s fiscal position after chancellor Kwasi Kwarteng delivered his mini budget – a £45bn tax cut package on Friday.

The International Monetary Fund (IMF) has joined the criticism, saying the chancellor should “re-evaluate” his plan as it could drive inflation higher, reports the Financial Times. In a statement, the IMF said that “Given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture. It is important that fiscal policy does not work at cross purposes to monetary policy.”

Yorkshire Building Society, Virgin Money and Skipton Building Society are only a few of the building societies which are ceasing all mortgage offers for new customers.

Santander and HSBC followed suit and withdrew mortgage products for new customers.

“We’re temporarily removing all 60% and 85% LTV products from the new business range,” Santander said.

Nationwide, on the other hand, significantly raised interest across its full line of mortgage products, and announced its two, three, five and ten year fixed rate mortgage deals will be increasing between 0.9% and 1.2% from Wednesday.

Although Nationwide has so far fallen short of withdrawing loans offered to new customers.

HSBC, Santander and Lloyds Banking Group and Nationwide account for roughly half of the UK's mortgage market, according to the Financial Times.

What does this mean for you and your mortgage?

Mortgage prices are likely to rise, but also borrowers will face a smaller pool of products to choose from.

Mortgage borrowers who are already on fixed deals are likely to be protected from much of the upheaval for now.

But when they do have to find a new deal they will face significantly higher borrowing costs after all UK Finance predicts that another 3.1 million households are due to renew their mortgages when their fixed-rate periods expire in 2022-2023.

For the 1.6 million people on variable rate deals, rates on the mortgages will see an immediate rise.

New buyers are likely to find that the maximum amount they can borrow is now lower due to affordability stress testing.

And this problem is not just confined to new buyers. Those looking to remortgage next year may find it more difficult to do so as they may be unable to pass lenders’ affordability stress tests.

“Probably more people than ever will stay with their existing lender and take product transfer rates,” said Aaron Strutt, of Trinity Financial mortgage brokers.

For some the increase in mortgage costs will mean that they need to take tough decisions and cut down spending on other things, but many people may have to cut down on essential spending and simply may not be able to weather the increases in mortgage costs.

“Households refinancing a two-year fixed rate mortgage in the first half of next year will see monthly repayments jump to about £1,490 early next year, from £863 when they took on the mortgage two years prior,” said Samuel Tombs, chief UK economist and Gabriella Dickens, senior UK economist of Pantheon Macroeconomics.

What can you do about it?

It may be worth shopping around for a fixed-deal right now, especially if you have six months or less before your fixed-mortgage deal runs out, says the Guardian.

“If you have six months or less to run on a fixed-rate mortgage it might be wise to start shopping around for a new rate. Given the market turmoil, you may want to talk to a broker who understands the fast-changing mortgage sector outlook and can track down the best rates.”

Those who have excess cash can reduce the bill by paying part of the mortgage early. While it may be rare to have the money to pay off a mortgage, you can save a substantial amount by paying off early.

With a recession looking increasingly likely in the UK, check out our other tips on how to prepare for a recession and save money during these turbulent times.

It’s fair to say a lot has changed for Lloyds Bank shares since the mid-1990s. In 1997 the group reported a post-tax return on equity (RoE) of 40%. At its latest half year result, the lender was praised by the City for raising its full-year guidance from 10% to 13% RoE.

The outlook for Lloyds Bank shares has changed

Analysing what has changed and what hasn’t is instructive. Lloyds needed under £6bn of shareholders’ equity to deliver post-tax profit of £2.35bn in 1997.

In those days, when the Spice Girls were topping the charts and Pete Sampras was winning Wimbledon, shareholders’ equity was just under 4% of total assets of £158bn.

Shareholders’ equity stands at £50bn today, and the bank’s total assets have ballooned to £886bn. But profits have not kept pace with the bank’s balance sheet growth. If they had, then Lloyds would be reporting the highest profits of any company in the FTSE 100 index.

Dividend growth has also been a disappointment. The total payout of £0.9bn on Lloyds Bank shares in 2021 was just the same as the distribution in 1997.

The good news is there are some favourable tailwinds blowing across the banking sector.

Inflation and rising interest rates

Lloyds doesn’t have a problem with funding – it has £478bn of deposits, up £70bn compared to a couple of years ago.

As restaurants were closed and travel was difficult over the pandemic, consumers had few options to spend, and savings ended up accumulating in bank accounts.

As the bank is offering loyal savings customers just 0.2% interest on savings, annualised interest expense for the bank is just £500m on those almost half trillion pounds of customer deposits.

The bank can take these deposits and lend the money overnight to the Bank of England earning 1.75% with no risk or buy UK Government bonds, currently yielding above 3%. In simple terms, Lloyds is not passing on the benefit of interest rate rises to savers, and if this continues will enjoy windfall profits.

Windfall profits should be a net positive for Lloyds Bank shares, although the past two decades have shown that bad behaviour by banks and poor PR has been bad news for shareholder returns, while senior management has continued to do very nicely from bonuses.

Will falling house prices dent profits?

The biggest risk to the company’s outlook is the prospect of an economic slowdown and falling house prices, which will lead to rising bad debt impairments.

The cheap mortgage deals and stamp duty holidays which re-ignited the UK housing market during the pandemic have come to an end. Rates on two-year fixed mortgage deals have trebled in the space of 12 months.

This tightening of credit conditions is already having an effect on the market. The Bank of England’s most recent figures show mortgage approvals, a lead indicator for the housing market, down 14% year on year.

Lloyds mortgage book stands at £310bn and has an average loan to value (LTV) ratio of 40%. Unlike the run-up to the financial crisis, Lloyds has just 3% of mortgage balances on an LTV of greater than 80% as regulators have discouraged high LTV lending.

In other words, house prices could fall 20%, and just 3% of the bank’s mortgage borrowers would find themselves in negative equity. That means a fall in house prices similar to that seen in the 2008 crisis is not, in itself, enough to cause the bank a problem.

The unknowable risk to Lloyds Bank shares

Instead, the unknowable risk is unemployment. The Bank of England is forecasting five consecutive quarters of recession, with unemployment, a lagging indicator, starting to rise halfway through next year.

For context, in the three years following the financial crisis Lloyds took an impairment charge of £8.9bn in the retail bank alone, of which £4.2bn was in 2009. The vast majority of those impairments were from unsecured bad debts, such as credit cards, rather than the mortgage book.

Industry data shows credit card borrowing is increasing by 13% annually, the highest annual rate since October 2005 (+13.7%) could be an early warning sign of problems to come.

In response, Lloyds says that credit borrowing is not being driven by the cost of living crisis.

Instead, wealthier households are spending on non-essentials like travel, which is up 300% year on year and has now recovered to pre-Covid levels. Analyst consensus forecasts for the bank show current expectations are for losses well below those experienced following the financial crisis: £1.2bn impairment for group bad debts next year, rising to £1.4bn in the 2024 financial year.

If those forecasts turn out to be right, then the bank is trading on a price/earnings ratio of below seven times 2023 and 2024 earnings. The forecast dividend yield is close to 6%.

Enjoying a benefit from rising interest rates means that Lloyds Bank shares could outperform the wider market, as most stocks are harmed by rising interest rate expectations.

Abrdn plc (LSE: ABDN) currently offers one of the highest dividend yields in the FTSE 100. The company, formerly known as Standard Life Aberdeen plc, yields 8.4% based on Refinitiv analyst estimates.

It pays to be sceptical of high dividend yields and in this case, there’s clear evidence that this might not be sustainable. The company’s dividend cover – the ratio of earnings per share divided by the dividend payout – stands at 0.7 on a forward basis suggesting the firm is paying out more than it can afford – a clear red flag for income investors.

That said, dividend cover is a simplistic metric and it’s generally not wise to put too much weight on any one figure.

So before we get into whether or not the company’s dividend is sustainable, let’s take a step back and look at where revenue comes from.

Abrdn has been struggling to grow in a competitive market

Abrdn’s business is, to quote the awful corporat-ese, “structured around three vectors”. These are “investment solutions”, “adviser solutions” and “personal wealth services”.

Since selling its life assurance, pensions and long-term savings arm in 2018, abrdn has been focusing on growing its wealth management businesses, which tend to have higher profit margins, fewer regulatory constraints and reduced capital requirements.

Trouble is, wealth management is a highly competitive industry with many giant asset managers around the world all fighting for market share. The London-listed company is up against the likes of American giant Blackrock (NYSE: BLK) and FTSE 100 peer Schroders (LSE: SDR). Both of these firm’s have a wider global reach and a bigger pool of client assets.

Despite management’s best attempts, abrdn is really struggling to grab market share. AUMA (assets under management and administration) fell to £508bn the first half of 2022, compared with £542bn last year - that’s even after including assets from the group’s recent acquisition of trading platform Interactive Investor (ii).

The drop was driven largely by the final stage of the withdrawal of Lloyds Bank’s (LSE: LLOY) vast Scottish Widows portfolio. The bank announced that it was pulling this mandate from abrdn in 2018, three years earlier than contracted, due to conflicts of interest. After a lengthy legal spat, abrdn was allowed to continue managing £35bn of the £109bn Scottish Widows portfolio with the rest being split between BlackRock and Schroders.

Even after stripping out this large outflow, AUMA still dropped overall.

The dividend may be more affordable than it looks at first glance

Earlier in this article I mentioned that abrdn’s earnings per share are not enough to cover its dividends, and that’s true – but not on management’s preferred measure of profit.

The firm’s annual report notes that in 2021 adjusted operating profit totalled £323m (fee income minus expenses) generating adjusted earnings per share of 13.7p against a dividend payout of 14.6p.

However, adjusted capital generation, which shows how adjusted profit contributes to regulatory capital, totalled £366m for the year. On this basis, the dividend payout is covered 1.2 times. Management sets the dividend based on this figure, not the adjusted operating profit number outlined above.

If this all seems a little complicated, you’re right – it is. There are lots of moving parts here and to add to the confusion, abrdn also reports its IFRS profit before tax measure, which includes items such as restructuring costs and profit on disposal of interests.

On this metric, the company earned £1.1bn in 2021 mainly thanks to investment gains on the group’s share of Indian life insurance group HDFC Asset Management and interest in Phoenix (received as part of the sale in 2018). However, this figure is highly volatile. For the first half of 2022, the group’s IFRS loss before tax amounted to £320m. This reflected losses on abrdn’s listed investments (undoing a chunk of the IFRS profits earned last year).

Market conditions are also having another impact on the group’s bottom line. As part of its shift towards wealth management, the company has become increasingly reliant on trading and management fee income generated on investors’ assets. As volatility has increased, investors have pulled back, leading to reduced fee income (and the value of their portfolios has declined hitting management fee income). As a result of this double headwind, group fee based revenue slumped 8% during the first half of 2022.

This soup of numbers might not mean much to all readers, but what it shows is that while abdrn might be making enough money to cover its dividend today, there’s no guarantee this will continue.

No immediate threat, but it’s hard to tell what happens in the long term

Overall, I don’t think abrdn’s dividend is really under threat today. The company is generating enough capital to cover the distribution (including asset sales and regulatory capital adjustments) and that’s what matters in the short term.

It’s the longer term I’m concerned about. Abrdn needs to attract new investors to grow AUMA and fees. It’s not clear it will be able to do that in the highly competitive wealth and fund management industry. It may even have to cut fees charged to clients to remain competitive.

Analysts appear to agree. Since the beginning of this year the average Refinitiv analyst estimate for 2022 earnings has been revised lower by 30%. With that being the case it’s not really surprising that the stock has fallen 29% over the past six months.

The big question is, if abrdn can’t grow earnings, how will it be able to grow its dividend in the long-run? That’s a question I can’t answer. As such, while I don’t think abrdn’s dividend is at risk of being cut today, I wouldn’t want to add the shares to my portfolio. I think there are other companies out there with better growth prospects and more attractive valuations.

After all, there’s more to investing than dividends. Capital growth is also a key component of the equation.

SEE ALSO:

How to find the best stocks with dividends

Five dividend stocks to beat inflation

The ten highest dividend yields in the FTSE 100

It’s hard to believe now, but UK banks’ share prices had a strong start to the year, up between 15% and 25% until mid-February. They reported results for the financial year ending December 2021 at the end of last month, with no obvious problems. We saw profits rebound and outlook statements suggest improving revenue and further capital returns to shareholders in the form of dividends and share buybacks. Then Russia invaded Ukraine and NatWest’s, HSBC’s and Lloyds’ share prices fell by more than 20% from their 2022 highs. Barclays has been hit even harder, down 30%. They have since rallied somewhat, but still remain down by between 12% (HSBC) and 22% (Barclays).

Direct exposure to Russia plays little part in this. UK banks have $3bn exposure to the Russian financial system, according to the Bank of International Settlements (BIS). While $3bn may sound like a lot of money, Austria (mainly Raiffeisen) has six times more exposure at $18bn. French (mainly Societe Generale) and Italian banks (Unicredit and Intesa Sanpaolo) have eight times more exposure at $25bn each. Societe Generale has said that it would be able to withstand the extreme scenario of having its Russian bank confiscated by the authorities, but so far banks have admitted losses that are in the tens of millions, not tens of billions.

Following the 2008 financial crisis, lenders are in much better shape to absorb losses, mainly because regulators demanded that they rebuild their capital ratios and fund with more equity. Excluding NatWest – which has sold businesses and shrunk total assets by a trillion dollars – the sector has now increased tangible equity funding by around $90bn in the last ten years. In total, UK banks have $420bn of equity to absorb losses. So while $3bn UK bank direct exposure to Russia might sound like a lot of money, it really isn’t compared with the equity on their balance sheets, and is much less than that of European competitors.

Reassuring results

Results for the 2021 financial year were reassuring. Bank profits have been in long-term decline, but recovered in 2021. This was driven by lower bad debts compared with 2020, because banks took large provisions at the start of the pandemic and found that bad debts weren’t as high as the worst-case scenario. Hence statutory profit before tax doubled at HSBC and trebled at Barclays. The two banks the government rescued in 2008 fared even better, with Lloyds increasing profit before tax sixfold and NatWest recovering from a loss in 2020 to report a £4bn profit.

All UK banks have profitability (as measured by return on tangible equity – ROTE) targets of 10% or above and the outlook statements (which were written before the Russian invasion) sounded more confident that these can be achieved. For instance, HSBC said that it was likely to achieve at least 10% ROTE in the 2023 financial year, a year earlier than it had previously expected. Barclays and Lloyds already exceed their targets, reporting 13.4% and 13.8% ROTE respectively. This was helped by each bank’s revenue performance, but also a £0.7bn impairment release for Barclays and a £1.7bn release for Lloyds.

NatWest announced a £750m buyback; Barclays £1bn and Lloyds £2bn. The Asian-focused banks (HSBC and Standard Chartered), which are reporting lower returns and were trading on lower price to tangible book multiples, announced $750m and $1bn buybacks respectively. However, those buyback announcements have done little to support share prices. Since the obvious exposures to Russia’s economy are manageable, it’s the secondary and tertiary effects that share prices are responding to, and that’s what we should be thinking about as well.

Central banks have been slow to tighten

Merryn interviewed Andy Haldane, previously the Bank of England’s chief economist, for the MoneyWeek podcast in July last year. Haldane worried that other central bankers were too relaxed about the risk of inflation and that its effects might not be transitory. In June last year he was the only member of the Bank’s monetary policy committee (MPC) to vote to raise interest rates. He suggested that inflation could exceed the Bank’s 2% target for longer than most people expected, which would result in central bankers’ credibility being questioned.

Although central banks were slow off the mark in tightening policy, by the start of this year the strength of the post-pandemic economic recovery meant that most analysts were expecting to see steadily rising interest rates. You may be wondering: if interest rate rises have been expected, why the panic now?

Ultra-low interest rates are no good for banks, because banks make money from lending out their deposit funding. In normal times, customers’ deposits (which are liabilities on banks’ balance sheets) represent a cheap and stable source of funding. However, when interest rates are below 1%, banks don’t derive any benefit from this deposit funding, because there’s so much other liquidity freely available. As interest rates rise, banks will be slow to pass on the benefit to savings customers. Instead, net interest margins will widen (which is better for shareholders than it is for customers). As long as central banks are responding to a strong economy, rising interest rates are good news.

That was the bull case. But Russia’s invasion of Ukraine and the oil price rising to over $120 per barrel has changed the outlook.

The threat of stagflation

HSBC warned in its annual report that “further increases in energy prices – for instance, as a result of escalation in the Russia-Ukraine crisis – could keep inflation high and force central banks to tighten monetary policies faster than currently envisaged”. During the global financial crisis of 2008-2009, oil peaked at almost $150 per barrel – trebling from the $50 per barrel it traded at in January 2007. At the time a wiser, older broker told me: “Oil has never trebled in value and not caused a recession”. It wasn’t different that time and it probably won’t be different this time.

The problem is that we may see consumers’ disposable incomes being squeezed by higher commodity prices, rising inflation and rising unemployment all at the same time. That is what happened in the 1970s and it’s known as “stagflation” (stagnation + inflation). History shows that while quantitative easing might have helped stimulate growth from 2008 onwards, central banks can’t print their way out of a commodity shock. Longer term, rising inflation combined with rising unemployment is unambiguously negative for banks’ share prices. Any benefit from higher interest rates would be wiped out by bad debts.

These are the risks that share prices are reflecting. And if we see stagflation, investors should avoid the sector altogether. But if these fears are overstated, there could be some value in banks at this point.

The case for NatWest – Britain’s worst bank

A common-sense investment strategy is to pick a sector with favourable long-term prospects and buy a company from that sector that has favourable economics. An example might be Halma or Spirax Sarco in the engineering sector.

When it comes to UK banks, common sense works less well. The “quality” bank with the best long-term record is HSBC, whose share price has halved in value in the last 20 years. It’s not much good to point out that in relative terms HSBC has done better than the competition: Lloyds and NatWest were part-nationalised and shareholders diluted by the government in 2008. Barclays has fared little better, with the shares down by 70% compared with 20 years ago. In short, banks have not been “buy and hold” investments. With that in mind, I would suggest a different, counter-intuitive approach: wait until the tide is on the turn and then buy the lowest-quality bank, which is NatWest.

Expectations are low: NatWest lost money for nine consecutive years following the financial crisis. However, NatWest has essentially been three businesses i) a non-core shrinking “bad bank”; ii) good businesses that it was forced to sell as a result of receiving state aid (eg, Direct Line Insurance); and iii) a profitable core franchise. The years since the financial crisis have been dominated by the first two factors, but by their nature they have declined in importance and the core franchise should become more important.

NatWest’s annual report shows the bank should benefit by almost £1bn from a one percentage-point parallel shift in the sterling yield curve (that means short-term rates rise as the Bank of England raises the base rate, but the ten-year bond yield – which central banks don’t control – goes up by the same amount). That’s an automatic benefit equal to 25% of last year’s profit before tax of £4bn. As long as the yield curve remains upward sloping – meaning short-term rates (eg, 2%) remain lower than longer-term bond yields (eg, 4%) – some of that benefit is sustainable in future years.

Aside from the macro-economic background, there are still company-specific concerns. For instance, last year NatWest paid £466m of “conduct costs” for the financial year 2021, including £265m for money laundering for a Bradford jeweller that deposited £260m in cash, some in bin bags with a “musty smell”. Many of these problems were the result of cultural failings – and as the bank shrinks, it should become easier to avoid these hangovers from the past. Note also that the UK government still owns 52% (down from 97% in 2008), but not all of these shares are being placed on the market. Instead, NatWest is buying back from the government at the market price.

NatWest is trading on 0.5 times revenue and 0.6 times tangible book value. The forecast price/earnings ratio is less than six times forecast 2023 earnings, according to SharePad. That suggests investors believe it will deliver returns well below management’s target of 10% ROTE. But having shrunk its balance sheet by over £700bn in the last decade, the bank has been de-risked. The share price currently looks to be anticipating a very difficult stagflationary environment. The Ukraine war and sanctions may drive that scenario – but if we see commodity prices fall, that would be the signal the tide has turned, and would be the time to buy.

In an effort to combat inflation, the Bank of England increased the base interest rate from 0.25% to 0.5% last week. What does that mean for your mortgage?

“The one in four mortgage holders who have a standard variable rate (SVR) will see their monthly payments rise almost immediately as banks pass on the 0.25% hike to their default mortgage rates,” says George Nixon in The Times.

You need to act fast if you’re looking to remortgage to secure the best rates. Many major lenders have already announced they will be increasing their interest rates in line with the Bank of England’s rise. Barclays, Aldermore, Santander, Halifax, Nationwide and Lloyds have all said their standard variable rates will rise by 0.25% from 1 March. This could affect anyone on a tracker mortgage with them, although that will depend on the individual details of your deal.

Remortgaging is still an option

If you have a fixed-rate mortgage, how this rate change will affect you depends on when you last secured your interest rate. Homeowners with a five-year fix that is coming to an end could still get a better deal than when they last remortgaged. The best rate available five years ago for 60% loan-to-value (LTV) was 1.79% from Skipton Building Society. You can still beat that with First Direct’s five-year fix at 1.54%. However, homeowners with a two-year deal coming to an end could see their bills go up. In January 2019 the best rate on a two-year fix was 1.19%, now the lowest offer is 1.3%.

But it isn’t all bad news. Remortgaging could still be a way to offset the rising cost of living. Some people will be able to save more than £200 a month, or in excess of £2,000 a year, by making a simple switch, says Hilary Osborne in The Guardian.

If you are on your lender’s SVR or a tracker mortgage, now could be the time to switch to a fixed-rate deal. Someone with a £150,000 mortgage on Yorkshire Building Society’s SVR, which is 4.49%, who switches from that to First Direct’s market-leading five-year fix at 1.54% with a £490 fee, would shave £228 a month off their repayments.

Solutions for the longer term

Now might also be the time to consider a longer-term fix. Interest rates on ten-year fixed-rate mortgages have been falling in recent months. “Competition in the ten-year fixed rate market is fierce and has emerged as a key battleground for lenders,” Chris Sykes, mortgage consultant at broker Private Finance, told the Financial Times.

Potential borrowers and lenders expect consistent base-rate increases for the next year and beyond, which is driving demand for longer-term products. Lloyds brought out a new ten-year fixed rate deal at just 1.66%. It comes with a £999 fee and is available to borrowers with a deposit or equity of at least 40%.

Another way to counteract rising rates and keep your mortgage repayments low is to improve your property’s loan-to-value (LTV). Lenders reserve the cheapest deals for people who have bigger deposits or more equity built up in their home because they represent less risk.

If a house with 40% equity had to be repossessed, the lender can be confident they will get their money back when they sell it. A property with only a 5% deposit could lose the lender money if they can’t sell it for at least 95% of what it was valued at when the mortgage was taken out.

“If you need to remortgage it is well worth checking how much you need to pay to qualify for the next LTV bracket,” Aaron Strutt from the mortgage broker Trinity Financial told The Times. “If you are locking into a longer-term rate, a small capital repayment may mean that you could qualify for a much cheaper rate.”

Know the true value of your house

You may not need to put your hand in your pocket to improve your LTV. Before you remortgage, get your house revalued. House prices have rocketed over the past year, with average growth of 9.7% in 2021, according to the Halifax House Price Index. The average UK home was worth £276,759 in January – up £24,500 from the same month last year and £37,500 higher than two years ago.

Rising prices mean your house could have increased in value without you lifting a finger. “If you have had work done, you may also be able to get your home revalued and get a cheaper rate,” says Strutt.

It all started with the Big Bang in 1986. That was Margaret Thatcher’s attempt to shake up the cosy relationships in the City of London and build a globally competitive financial services industry of which the country could be proud. The old separation between brokers and jobbers (market makers), and between retail and investment banking, were dismantled and cleared away – without much consideration of whether there were sound reasons for these divisions to exist, like Chesterton’s Fences.

Retail banks such as Lloyds, Barclays and Midland were allowed, if not encouraged, to own stockbroking firms. The likes of de Zoete Wedd, Hill Samuel and Samuel Montagu were bought by UK retail banks. Other brokers such as Phillips & Drew, Warburg’s and Smith New Court were bought by large investment banks from overseas. UK banks expanded into new territories and built empires where the sun never set. Banks attracted a new breed of rocket scientists and physicists to help them price complex derivatives. A new model emerged: “universal banking”, implying a bank could do everything under one roof. London became a centre of global financial competition.

The Big Bang was good for London as a financial centre, but there were two questions no one thought to ask: was it good for customers, and was it good for shareholders? The answer to both questions is an uncontroversial “no”.

Few benefits for customers

Barclays’ fixed-income division may have risen up the corporate-bond underwriting league tables, but it is hard to see how this brought any benefits to a Barclays current-account customer, for example. Even for retail banking products, having a current-account relationship with one bank doesn’t mean a better mortgage deal or cheaper home insurance. It is almost always true that customers do better to look at the best-buy tables than trust their bank to cross-sell to them. This is especially true of mortgages, where high house prices mean a large mortgage over 30 years is very sensitive to the interest rate offered, and hence customers would be mad not to go to a mortgage broker to find the best deals on offer. The same logic applies to credit-card customers, driven by eye-catching balance transfer rates. So using current accounts to cross-sell additional banking products has proved more difficult than universal bank management would like to admit.

It is even harder to see how a customer of what was once Midland and is now part of HSBC benefits from the parent company’s high market share in Hong Kong, let alone the ill-advised expansion into Mexico, Brazil, Argentina, or risky US subprime mortgages. It is patently ridiculous to claim that HBOS, the UK’s biggest mortgage lender, was somehow helping local borrowers in Halifax by also lending money to fund the buy-out of M Resort Spa Casino in Las Vegas in the run-up to the global financial crisis in 2007-2009. Indeed, HBOS’s management were securitising their high-quality UK mortgages and selling them in financial markets, and replacing these assets with collateralised debt obligations (CDOs) sold to them by US investment banks, which contained packaged up lower-quality US subprime mortgages.

No economies of scale

Aside from customers, the universal banking model has not been kind to shareholders either. The UK banks have underperformed the FTSE All Share index since 2002. Yes, even before the financial crisis banks were unloved by fund managers, who worried about overleveraged balance sheets, and how sustainable returns on equity would turn out to be. As it happened, the fund managers were right to be wary.

As the pull of size and consolidation worked on UK banks like gravity, this was justified in the name of efficiency. The trouble is that there is very little evidence that big banks are more efficient. Instead, they became in danger of collapsing under their own weight, like financial black holes. The cost/income ratios for large UK banks such as Barclays, HSBC, Lloyds and NatWest were all above the 60% level in the 2020 financial year – not much improvement from cost/income ratios seen ten, 20 or even 30 years ago. The smaller UK mortgage banks such as Northern Rock (before it failed) operated a more efficient model, with a cost/income ratio close to 30%.

My own experience of banking efficiency as an employee supports this. Over the years I have worked at both large banks (Credit Suisse, Societe Generale) and smaller brokers (none of which have survived to the present day.) Arriving at any small broker on my first day of work, my IT systems were set up, my Financial Services Authority registration had been transferred over and my new colleagues were pleased to see me. At large banks the first day tended to be shambolic. Most conversations with HR and IT started with the sentence: “Oh, hello! We didn’t know you were starting today”.

That’s because bringing all the banking activities under one roof created more complexity than any efficiency savings. Banks still needed to spend lots of money on technology systems. And any savings from streamlining the back office were lost, because they needed to employ an army of legal and compliance staff to manage conflicts of interest, for instance building “Chinese walls” to keep employees with inside information separate from market-facing roles and prevent the bank being fined by the regulator. The huge increases in computing processing power and decline in the cost of computer hardware hasn’t benefited shareholders in banks at all. By December 2014, Antony Jenkins, the then-chief executive of Barclays, was admitting that the universal banking business model was dead. Diversifing by business, customer and geography hadn’t worked.

Banks have many challenges

In recent years, low interest rates have made life even harder for banks. Most of the time, banks make a margin on their retail deposit funding, because their average interest costs are below central bank rates. But when base rates drop below 1%, margins shrink because the banks can’t charge customers enough for looking after their savings (notwithstanding the efforts of some European banks to levy negative rates on retail deposits). As interest rates rise, analysts expect banks to increase revenue. Still, while margins are set to improve, technology spending is likely to rise even faster and bad debts are hard to predict.

Setting aside the barrage of regulatory fines, the other reason that banks have struggled to generate the return on equity (ROE) that the market wants (10%) is that the regulator has demanded that they fund their balance sheets with less debt and more equity. Larger banks that are judged “systemically important” have to fund with even more equity, because of the serious consequences of failure. In very simple terms, that even bankers can understand, if the “R” of ROE stays the same but the denominator “E” increases, then it is a mathematical inevitability that ROE will fall.

A further problem is that banks tend to reward their loyal customers with worse deals than the new customers they are trying to tempt away from other banks. In the short term, this strategy works. Customers have better things to do than check they’re still getting a good deal every couple of months. But over time, the strategy is bad news for shareholders. It’s terrible for banks’ brands to use inertia from loyal customers to generate high returns. Thus the last few years have seen disruptive new entrants, such as Atom, Monzo, Starling and Funding Circle.

In theory, these financial technology (fintech) firms can offer more competitive services because they don’t have legacy IT system costs or a branch network. That said, given that the disrupters tend to be loss-making, it could just be that their services are being funded by deep-pocketed venture capitalists.

Last year the UK saw $11bn of investment into fintech. There were 713 deals, with Revolut, Monzo, and Starling in the top five amounts raised. Zopa, the peer-to-peer lender founded almost 20 years ago, still managed to raise $220m from SoftBank’s Vision Fund 2. The UK fintech sector seems particularly good at attracting capital, because that $11bn is more than double the next largest in Europe: Germany ($4.4bn), followed by France ($2.3bn) and Sweden ($1.7bn). Overall, $24.3bn was invested across the continent in 2021, with the UK representing nearly half (45%).

Most disrupters aren’t disrupting

That sounds impressive, yet the pandemic has not been the boon for fintech that it has been for tech firms, as Marc Rubinstein points on Net Interest, his financial sector blog. Monzo’s fund raise in May 2020 was at a 40% discount to its previous funding round. German digital bank N26, funded by Peter Thiel, pulled out of the UK after finding the competition too strong.

Meanwhile, branch-based challenger bank Metro Bank has fallen 95% since its initial public offering (IPO), while peer-to-peer lender Funding Circle is down 75% since its IPO at the end of 2018. These have not been anyone’s idea of a successful investment.The problem is that UK banks’ core business of taking customer deposits and lending out money is highly competitive. Thus the fintech winners are not the ones trying to re-invent universal banks. Revolut and Wise (formerly TransferWise) show that fintech isn’t just about technology, it’s also about finding the areas of greatest risk-adjusted return. They have focused on cross-border payments, attacking the huge difference between the currency rates available to large corporate clients in wholesale markets and the price that retail banking customers pay.

Ten years ago there was a complaint to the Office of Fair Trading by consumer groups because banks were charging 3% on foreign currency transactions. Some debit cards also added a further fee of £1.50 per transaction, while using a bank card to withdraw cash abroad could cost up to £4.50 a time. At the time a spokesman for the British Bankers’ Association (BBA) blamed the high fees on foreign payment systems, saying “transaction costs abroad are driven by the costs of overseas payment systems, often in countries where free banking does not exist”.

Of course, this was nonsense. And hence both Revolut and Wise were founded by eastern Europeans who were appalled at the price gouging from banks when they wanted to send money home.

Wise and Revolut: the two winners

Wise was originally a way to send money to bank accounts overseas (see below). It unbundled a specific financial product and offered better value than the competition, with no cross-subsidisation.

Revolut began as a pre-paid card and an app for spending money abroad. It planned to levy a small fee every time a customer used the card, but realised that there wasn’t enough money in this to support the cost and started charging subscriptions. It is remarkable that an app can charge customers up to £13 a month, while UK retail banks with higher-cost branches and legacy systems struggle to convince customers to pay anything. Rather than lower costs, Revolut is able to make money by charging customers to access services they value, such as crypto trading, which has done well over the pandemic. That said, Revolut’s subscriptions made it £222m of revenue in 2020, but direct costs and administration expenses meant that the business made a loss of £207m the same year.

Wise and Revolut attracted millions of customers, despite not having a banking licence. They had an e-money payments institution licence, which means that they weren’t able to lend out money to borrowers and take credit risk. Instead, they have to keep customer funds in cash or other low-risk alternatives. (Revolut was granted an EU banking licence last year.)

So the great irony of fintech is that technology has not meant bigger, more efficient banks. Nor has it allowed new entrants using technology to disrupt saving and lending. The real success story is built on the fact that wholesale customers who deal in large size receive a better price than individuals. That’s true in any industry and financial services is no different. That was the original reason for brokers (who bought and sold on behalf of retail clients) and jobbers (who made a market and dealt wholesale). Wise and Revolut have used technology to reduce the size of the retail versus wholesale price difference. That outcome is light years away from anything foreseen at Big Bang.

Is Wise worth 90 times earnings?

Wise (LSE: WISE), which has a March year end, put out a third-quarter trading update in mid-January. It’s enjoying strong growth, transferring over £20bn in the three months to December, up by 38% from a year ago. So far this strong transaction growth has meant reducing costs, the benefit of which it shares with customers by driving down fees, while generating cash for reinvestment.

The firm says that over the last year it dropped prices across 50 currencies and fees are now 0.60% of transaction value on average, nine basis points lower than a year ago. It was profitable in the first half of the year, to September 2021, making £19m, and analysts are forecasting profits to reach £150m in the 2024 financial year, according to data from SharePad.

Analysts covering Wise are forecasting around 24% revenue growth in 2023 and 2024, and the total addressable market for cross-border transactions is huge. There were around £2trn of global cross-border payments made by individual consumers in 2020. Around two-thirds of that is done by banks – Wise estimates that it has a market share of around 2.5%. That £2trn pool is also growing.

Like many fast-growing tech stocks, the shares look expensive. The forecast price/earnings (p/e) ratio is 90 and price/sales (p/s) ratio is 15, according to SharePad.

This approach to growing fast and sharing efficiencies with users is similar to Amazon’s. Even after 25 years of growth, the “Everything Store” now has revenue of half a trillion dollars, but shows no signs of going ex-growth. It trades on a forecast p/e of 70. In his 2005 letter to shareholders, Jeff Bezos described Amazon’s strategy in this way: “Our judgment is that relentlessly returning efficiency improvements and scale economies to customers in the form of lower prices creates a virtuous cycle that leads over the long-term to a much larger dollar amount of free cash flow, and thereby to a much more valuable Amazon”.

Wise, like Amazon, intends to expand its product offering. It recently launched a service called “Assets” for UK customers. They can now transfer balances to an index fund, while still being able to spend or transfer money overseas as though the balance were still held in cash.

There are risks to Wise. One concern is the co-founder, Taavet Hinrikus, selling 11 million shares last year, and entering a loan agreement with Goldman Sachs where up to 49.6 million shares would be pledged as security. There’s also a dual share structure common to many tech stocks. The founders hold B shares that have nine times more votes than the A shares. That lets them keep control even if they decide to cash out their A shares.

I think the bull case is relatively easy to make, but the high valuation multiples mean that if the company disappoints, then it’s likely to be punished severely. For every Amazon-style investment, there are plenty of Groupons and Pelotons that don’t receive much attention – once hyped stocks that failed to deliver.

As part of his pledge to turn “generation rent into generation buy”, chancellor Rishi Sunak announced a 95% mortgage guarantee in the March budget, due to launch in April. The scheme, designed to encourage lenders to start offering 95% mortgages again after almost every single one was withdrawn due to the pandemic, will see the government partially compensate lenders if homeowners fail to pay their mortgage.

According to Which?, using data from MoneyFacts, the number of 95% mortgages available to buyers fell from 391 at the start of 2020 to just three by the end as lenders sought to protect themselves as the pandemic saw many people’s incomes fall.

The new scheme is available on new-build and existing properties up to £600,000 and is open to first-time buyers and home movers alike, but second homes and buy-to-let properties are not allowed. are eligible. Yorkshire Building Society beat the government to it, announcing the relaunch of 95% mortgages through their mortgage arm, Accord Mortgages, in mid March. Major banks including Barclays, HSBC, Lloyds, NatWest and Santander have all committed to launching deals in April under the scheme, too.

Yorkshire Building Society’s loan comes with an interest rate of 3.99% and a £995 fee. It’s not available for flats or new-build houses, or for people who are currently furloughed. Chances are that, as the government’s scheme launches, more lenders will be releasing different loans, so it’s worth looking into which lender offers the rates that suit you the most. It’s also worth noting that the better rates will be available to those with more substantial deposits. But, if 95% mortgages are still of interest to you, or you’re just curious, here’s a look at what’s on offer now.

According to broker Habito, who launched 40 year fixed rate mortgages earlier this month, if you were buying a property priced at £100,000 with a mortgage of £95,000, (so a loan to value (LTV) of 95%) repaying with a fixed rate over 25 years you’d pay:

• £472 a month with an initial rate of 3.44% with The Cambridge Building Society
• £490 a month with an initial rate of 3.79% with Nationwide
• £500 a month with an initial rate of 3.99% with Furness Building Society
• £524 a month with an initial rate of 4.44% with the Teachers Building Society
• £559 a month with an initial rate of 5.08% with Aldermore

The same search on comparethemarket also brings up the Loughborough Building Society’s mortgage, with a monthly payment of £493.61 and an initial rate of 3.85%.

In comparison, with a 20% deposit, monthly repayments for Nationwide – which offers the best rate according to Habito – would cost you £358, with an initial rate of 2.49%.

There are also far more lenders to choose from with higher deposits, but as we said more lenders should be coming out with 95% mortgages as the government scheme kicks in this month, and no doubt there will be some competition among them as to who can offer the lower rates.

The lowest rate is currently 3.44% with the Cambridge Building Society, but it should be pointed out that the cheapest 95% mortgage at the start of March 2020 was priced at 2.9%. So if a 95% mortgage is on the cards, it might be worth waiting for a little bit longer for lenders to regain confidence and lower their rates.

Earlier in the week I stumbled across an old TV ad from the 1980s for the Leeds Permanent Building Society. It featured George Cole (he of Arthur Daley fame) bumbling from wide-boy investment opportunity to wide-boy investment opportunity.

The moral of the ad was that, instead of getting involved in harebrained businesses, you’re better off putting your money in the Leeds Liquid Gold account, because it pays 7.65% interest. 7.65%! This was a normal rate of interest back then.

We’ve been forced into becoming a nation – nay, a world – of speculators

The Leeds Permanent Building Society was not so permanent as it turned out. It merged with the Halifax Building Society, and lost its name. The Halifax then merged with Bank of Scotland to form HBOS in 2001. Then, following the global financial crisis, that became part of the Lloyds Banking Group.

Today the equivalent Halifax Everyday Saver account pays 0.01%. We don’t have the option of 7.65% interest at the Leeds or anywhere else, and so we get involved in harebrained businesses, otherwise known as the stockmarket, instead.

This dynamic explains so much. When you do a job, you expend energy. For expending that energy, you are paid. The money you are paid is, in a way, a store of that energy, which you can then draw on at some later stage to buy some kind of good or service. For the system to work, it is vital that monetary energy is retained.

When interest rates roughly reflected inflation, as in the 1980s, most of your energy was retained. There was an honesty to the system – that has long since disappeared.

As globalisation took hold in the 1990s, the incredible manufacturing powerhouse that was China was able to export its cheap goods aplenty and we bought them aplenty. China’s manufacturing costs were a lot cheaper than ours, and so China effectively exported lower prices. Meanwhile, in the West, in our measures of inflation we focus on consumer prices, which, thanks to China, kept getting lower and lower. “Look, inflation is low”, said central bankers, as they ignored all the debt being created to buy houses, commercial property and financial assets. And so interest rates gradually got lower.

Some could see that their money was losing its energy. House prices were going up at ridiculous rates. It was easy to borrow money. And so buy-to-let became a thing. You’re better off keeping your money in “bricks’n’mortar”. Don’t sell your flat as you move up the ladder to buy a house, just keep the flat and borrow more.

Instead of putting your money into the Leeds, you might have bought government bonds or gilts. These also paid you an interest rate that compensated you for the loss in purchasing power of your currency, and helped retain that energy you had expended earning the money in the first place. But since 2008, that option no longer exists either. There is no way you’ll hang on to your expended energy. Pension funds only buy bonds because they have to. I’m not joking – regulations oblige them.

We had the transformative invention of tracker funds and the exchange-traded fund (ETF). No longer did you have to take individual company risk, or individual fund manager risk; you could just buy the stockmarket.

So where do you put your money now?

And so, this century, the stockmarket, especially to our American brothers and sisters, effectively became a savings vehicle that returned you somewhere between 5% and 20% a year. (Most years).

In fact, it became such an effective savings vehicle that many began using leverage (another word for debt) to buy more, and so the money supply increases. It was a bit like buy-to-let. And the stockmarket, especially in the US, continually rises to levels which for years have had fund managers scratching their heads and wondering why they bother. The S&P 500 has become a savings vehicle.

I remember interviewing James Turk, founder of Goldmoney, back in 2006. We talked at great length about the loss of purchasing power of fiat money. James went so far as to write a book: The Coming Collapse of the Dollar and How to Profit from It. “Buy gold,” James would say. At the time it was trading around $500 an ounce.

“If we buy gold,” I asked him, “how do we know when to sell it?” “You’re not going to sell it,” James said. “You’re going to spend it.” In other words we were going to go back to using gold as money.

Like Turk, Satoshi Nakamoto took a look at what was going on with the system, and he didn’t like what he saw either. So he invented a new system of money called bitcoin. It really caught on. Here was a new system of money to save in and, boy, did it retain its energy. “HODL!” (hold your bitcoin indefinitely) has become its war cry.

Today bitcoin is gold 2.0, they say. Digital gold. It is immune to the pernicious forces of inflation. Its inflation rate is set in code. Even large public companies are using it as their savings vehicle. Microstrategies (Nasdaq: MSTR) has just raised another billion dollars to buy bitcoin, on top of the billion and a half it has already spent. Jack Dorsey’s Square announced yesterday that it has purchased another $190m-worth.

So we buy bitcoin, we HODL. How do we know when to sell? You’re not going to sell your bitcoin, they say. You’re going to spend it. I’ve heard that one before.

No, really you are. Bitcoin’s most vocal proponents constantly lobby companies and individuals to start accepting bitcoin. You’ll be able to buy a Tesla with it. Some house vendors now accept bitcoin. You can buy art – in the form of NFTs (more on those in the next issue of MoneyWeek, out on Friday – subscribe here if you don’t already have a subscription).

What about the capital gains tax implications of spending bitcoin (rather than trading it)? Do you have to pay CGT when you spend it? I’m looking forward to watching that argument. Life would be so much easier if governments protected the purchasing power of the currency they issued. But life isn’t easy, and governments print. What’s your chosen savings vehicle?

Daylight Robbery – How Tax Shaped The Past And Will Change The Future is now out in paperback at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

Lloyds Banking Group has “poached” HSBC’s Charlie Nunn to be its next CEO, replacing outgoing boss António Horta-Osório, “one of Britain’s best known executives”, say Harry Wilson and Stefania Spezzati on Bloomberg. This reinforces Horta-Osório’s strategy of making a “bigger push into managing money for individuals” in order to diversify the bank’s revenue: Nunn is HSBC’s head of wealth and personal banking.

Lloyds shouldn’t assume that boosting sales by expanding wealth management services is a surefire route to success, says Lex in the Financial Times. Even if it does become one of the top three providers in the UK, it will be “tough” to make a lot more money from it given that fees in the industry are in long-term decline and top-quality wealth managers “remain costly”. Meanwhile the bank will have to deal with the effects of Covid-19, which has wiped out “the income equivalent of 40% of the past year’s cost base”. Given these problems, “a recovery to pre-pandemic levels of business” may be the best it can hope for.

An opaque transition process

The situation is also complicated by the fact that despite the supposedly “rigorous” selection process, Lloyds is not only unable to say “when Nunn will actually be joining” but also “remains unsure as to when Horta-Osório is off”, says Ben Marlow in The Daily Telegraph. It has already admitted that “there may be a period where neither of them are running it”, with chief financial officer William Chalmers stepping in as an interim CEO. Still, maybe Lloyds shareholders should be thankful that Horta-Osório isn’t staying on forever. The share price has halved since he took over.

The delay won’t stop Nunn from having to deal with some potential public-relations disasters next year, says Kalyeena Makortoff and Julia Kollewe in The Guardian. Chief among them is the fallout from a £245m loans scam run from the Reading branch of HBOS, which Lloyds took over in 2009. While six of those involved in the crime have been jailed, Lloyds is “still trying to complete a compensation programme” and is awaiting the results of an inquiry into allegations of a cover-up. Nunn is also likely to face continued criticism over his pay, even though it is lower than Horta-Osório’s package, which prompted “stinging criticism” from MPs.

Good public relations is particularly important given that Lloyds, like other banks, faces a nasty dilemma thanks to the “pile of bad debts” from the various emergency-loan schemes, says Katherine Griffiths in The Times. While the government made it clear that it would guarantee the loans, the terms and conditions require lenders to “try to recover them before they can claim on the guarantees”. But if they push too hard for repayment, they face a “public backlash”. Either way, Nunn can expect “uncomfortable” public appearances before the Treasury select committee and “behind-the-scenes pressure” from ministers about how to treat customers.

Britain’s house price boom continues unabated. The average UK house is now worth 6.5% more than it was last November, according to the latest figures from Nationwide.

That’s the strongest pace of annual growth recorded by the building society’s house price index since the start of 2015. But what happens when the pent-up demand and stamp duty holiday are over? Let’s have a think.

This isn’t a statistical illusion – we really are in the midst of a property market boom

A house price boom is a far cry from what everyone expected when the lockdown was in full swing. In May, high street bank Lloyds – Britain’s biggest mortgage lender – warned that it expected house prices to fall by 5% this year as its central scenario, or drop by 10% if things got really bad. The best-case scenario was for a drop of 2.2%.

Now, it’s worth noting that the banks had a good incentive to “kitchen sink” the coronavirus damage. Painting as grim a picture as possible means that it’s easier to surprise on the upside in the future. By the way, this is also how we know that the banks are in much better shape now than they were in 2008.

Banks can only afford to “kitchen sink” like this when their balance sheets are in good condition. When they’re being optimistic in the face of all evidence to the contrary – that’s when you have to worry. That’s not where we are today. (That in turn is one reason why the banks represented a good “buy” earlier this year, and almost certainly still do – indeed, Jim Mellon highlighted Lloyds in his recent interview with Merryn, right before the vaccine news ignited the recent rally.)

Anyway – it’s not as if Lloyds was the only gloomy one out there. As recently as July, the Office for Budget Responsibility (Britain’s fiscal watchdog) said that the best-case scenario for house prices this year was a gain of 0.2%. The worst-case was a drop of 2.4% this year, followed by a 12% slide next. I have to admit that I felt the OBR’s spread of potential outcomes was reasonable – although I also noted that the result would probably be closer to the best-case scenario. But clearly, that scenario has already been comfortably thrashed.

Also, it’s worth noting that this is not a “narrow” market. It’s easy to assume that this is just about a small number of expensive homes swapping hands. (House price indices do attempt to factor that sort of thing in, by the way, but there’s only so much they can do.) But this is a widespread boom. It’s not just prices that are going up, it’s transactions too. In October, mortgage approvals hit their highest level since September 2007. In other words, the number of mortgages being approved has returned to levels we haven’t seen since before the big crash in 2008.

That’s pretty noteworthy. After 2008, transactions plunged and then recovered to a post-crash “new normal” that seemed to be permanently lower than the previous norm (knocking around below the 70,000 a month mark, compared to regular 100,000-plus months in the boom era). Don’t get me wrong. A lot of that is purely home loans being knocked forward from months when the market was genuinely shut. But it’s still an interesting data point.

The question is: what happens next?

If you’re buying a house to live in, don’t spend any time worrying about “the big picture"

Clearly, the stamp duty holiday has helped to bring forward demand (people buying now to beat the deadline). And clearly, the housing market freeze at the start of this year delayed demand. So right now, two big factors are driving the present surge in demand. On top of that, the underlying economy is being artificially propped up by an extended furlough scheme. That has to end at some point – although the overall impact on employment might not be as bad as many expect if the vaccine does lead to a faster recovery than might otherwise have happened.

What does that all mean? Well, Andrew Wishart at Capital Economics argues that when all this pent-up demand is exhausted and the stamp-duty holiday ends, we’ll see a mild slump in 2021. We saw something similar in 2009, when there was a stamp-duty holiday designed to prop up the market post-crash. That said though, even if house prices were to fall by 5% next year – which is what Capital Economics currently expects – that “would leave house prices marginally higher at the end of 2021 than they started 2020.”

What does all of this mean for you as an individual? Let’s park property investment for now; that’s a specialist business. If you are looking to me to tell you what to do on that front, then the one thing I can tell you is that you don’t know enough about being a landlord to pursue that particular course.

So – talking purely about a house to live in – there are really only three positions that you can be in, relative to the housing market. One – you don't own a house. Two – you own a house and want to sell it and buy a different one. Three – you own a house, and you want to sell up and rent.

In all three of those circumstances, trying to time the market is a stressful waste of energy and it should be the bottom of your list of things to care about. It’s particularly irrelevant for the last two (if you are just moving home, then what you lose on the swings you gain on the roundabouts. And if you’re stepping off the “ladder” then you’ve got your money – the worst-case scenario is merely that prices keep going up). But even if you’re a first-time buyer, it’s just not worth worrying about.

Here’s what you should be worrying about: can you afford the mortgage payments? Have you built in a reasonable margin of safety for things going wrong? Have you considered what happens if interest rates go up? Have you considered what happens if your income goes down? Is owning more practical than renting? Perhaps even more importantly: do you like the house? Can you bear to live there for the next few years? Few things can make you more miserable than living somewhere that you don’t like. And owning is a lot less flexible than renting on that front.

I know this doesn’t feel helpful. This isn’t why you read Money Morning. You want a crystal ball. But here’s the alternative: you keep saving. You keep those savings in cash, because you can’t afford the risk of a market crash demolishing your capital when you need it. And you hope for a housing market crash that somehow leaves your job and savings unscathed, so that you can take your huge deposit, top it up with a cheap home loan, and buy from a distressed seller.

You could be waiting for years. You could get there and find that you have no job. You could get there and find that your savings pile is still not big enough to secure credit during a credit crunch.

My point is this: if you’re looking for a home to live in, don’t try to second-guess house prices. You might get lucky on prices. You might not. But in the grand scheme of things, that aspect of the transaction just isn’t worth the energy. Better to spend that time focusing on how to get the best price for the house that suits you best, and making sure that an unexpected event won’t leave you regretting the decision.

The Bank of England is working out the details of a deal that will allow the retail banks to start giving money to their shareholders again. So long as net lending continues to grow, and capital ratios remain robust, they will be allowed to restore their dividends. That is a significant reversal. At the height of the Covid-19 crisis in the spring, the Prudential Regulation Authority wrote to the main banks asking them to cancel any remaining payouts for 2019 and for the whole of 2020. In recent weeks both Barclays boss Jes Staley and Santander’s Ana Botin have called for an end to the ban in public, and now it looks as if, subject to a few conditions, that will be allowed. HSBC said this week that it was likely to start paying a dividend again soon.

A monstrous imposition

Cancelling the dividends took a heavy toll on the share prices of all the main banks this year. From 130p before the crisis, Barclays slumped below 100p before recovering slightly. Lloyds went from 63p at the start of the year to below 25p. NatWest (formerly RBS) dropped from 240p to below 100p, and HSBC from close on 600p in January to below 300p. That is a terrible performance. But then what could be expected? If a company is not allowed to pay out dividends it is hard to see any point in owning the shares – and we can hardly blame investors for selling out. It would help both the banks and the wider economy to restore those dividends as quickly as possible. Here’s why.

First, it is not the job of the Bank of England or its supervisory arm to control payouts to shareholders. The ban should never have been imposed in the first place. Sure, if the banks had been behaving recklessly and heading towards collapse, then it would have been reasonable to stop that. But that wasn’t happening. The main banks were chugging along fine, and making profits, much as usual. In its third-quarter results published this week, HSBC made more than £3bn in profits. If it wants to pay some of that out to its shareholders, there isn’t any reason why it shouldn’t. Likewise, Barclays made profits of more than £600m in the third quarter. Why shouldn’t shareholders get a slice? The ban on dividends was in truth more a PR stunt designed to pander to public opinion than it was anything to do with “prudential regulation”. It is not up to regulators to decide how a business is run or what it chooses to do with the money it makes. That is up to its owners and managers.

It’s not just the banks that are hurting

The second point is that the policy weakened all the retail banks. A bank with a plunging share price and unhappy, disgruntled shareholders looking for an exit, is not going to be a very happy place. The CEO will be under pressure, confidence will be damaged and staff will be worried about their jobs. A bank in those circumstances is not going to lend more, or launch new products, or offer help to customers in trouble. To get out of a recession you need healthy, buoyant banks – and you don’t create those by wrecking their share prices.

Finally, the dividend ban weakened the whole stockmarket as well. Retail banking is a major component of the FTSE 100 index. The high street banks are among its biggest companies. Hammer their share prices with dividend controls and it is not very surprising that the entire index quickly found itself under pressure. UK equities have performed far worse than most major rivals, and that is a big part of the explanation. Just as significantly, the banks represent a major part of the total dividends paid out by the FTSE 100. Of the ten FTSE companies paying out the biggest total dividends in 2019, two were retail banks: HSBC, with a total payout of more than £8bn; and Lloyds, with a payout of more than £2bn. Strip those out of the total, and the dividend yield on the whole index takes a significant hit. Investors then have less money to spend, and less to re-invest, and that hurts the whole economy. The sooner dividends are restored, preferably without any conditions attached, the better for everyone.

Loan and credit card repayments are to be frozen for three months as the Financial Conduct Authority (FCA) urges banks to provide consumers with financial relief in the face of an unprecedented crisis. The regulator has also proposed that banks offer a £500 interest-free overdraft, with anyone financially affected by the coronavirus pandemic eligible to apply.

The stopgap measures aim to support users of consumer credit products that might be facing financial difficulties because of the “exceptional circumstances” arising from the virus.

Previously announced changes to overdrafts meant that from 6 April financial institutions would only be able to charge a single annual interest rate for both arranged and unarranged overdrafts. Many providers had pegged their interest rates at around 40%, meaning the £500 interest-free overdraft would provide relief for many.

“Given these measures would span a wide variety of firms the FCA is conducting a brief consultation on our measures,” the FCA said. “However, given the national emergency and the significant impact on consumers' finances right now, we have asked all stakeholders to respond within a much shorter timeframe than normal.”

The FCA proposals for overdrafts and loan repayments will go out for consultation on Monday and if approved by banks could provide significant financial relief for hundreds of thousands of people.

If confirmed, measures would come into force by 9 April.

The three-month payment freeze applies to credit cards, store cards, and catalogue credit. If the measures are put into place, customers would be able to ask lenders for a payment freeze or for a reduction in monthly payments during this period.

Customers with personal loans would also be able to ask for a three-month freeze if needed.

However with the exception of the £500 overdraft proposal, banks and lenders would be allowed to charge a “reasonable” interest rate if a customer requests a temporary payment freeze.

The FCA’s proposals comes after it was revealed 950,000 applied for Universal Credit in the last two weeks.

“The proposed changes to the FCA’s rules should enable lenders to deliver further support to their customers and we will continue to work with the regulator as part of the industry’s commitment to get the country through these difficult times,” said Stephen Jones, Chief Executive of UK Finance.

Vim Maru, Retail Director at Lloyds Banking Group, said the bank welcomed the FCA’s guidance and announced that “customers can apply for payment holidays on mortgages and loans using a new online application that provides a decision in days, this will also be available for credit cards this week”. Missed payment fees on mortgages, credit card, and loans will be waived for three months.

From 6 April, “Lloyds Bank, Halifax and Bank of Scotland customers will also be able to access a £300 interest-free overdraft and we will introduce a new overdraft charging structure which means all of our customers will pay less interest than they do today.”

Tesco Bank has left the mortgage market by selling its £3.7bn loan book, says The Daily Telegraph. This is in line with a strategy to "slim down the number of services and products it offers to reduce costs". The 23,000 customers will be moved to Halifax, a subsidiary of Lloyds.

While supermarket banking services "were once seen as a credible threat to the dominance of major high-street banks", tighter regulation in the mortgage market and a series of digital-banking apps geared towards winning over younger customers have hampered supermarkets' financial divisions.

The deal is the latest sign of the "convulsions gripping the UK's mortgage market", says Ben Martin in The Times. These have been caused by post-crisis regulations forcing banks to separate legally their investment banking arms from their high-street businesses.

As a result, the capital that lenders with a global presence would previously have been "free to put to work across their businesses" is now "locked in their domestic divisions". This in turn has encouraged large banks such as HSBC and Barclays to put the money into mortgages, creating "intense competition" that has hit the margins of firms such as Tesco Bank.

Margins in mortgage lending are so low that although the loans were bought at a premium of 2.5%, Lloyds claims that they "would still produce better returns than issuing new loans in current market conditions", says Nicholas Megaw in the Financial Times. It is hardly surprising, then, that Lloyds was not the only bank to bid for them.

British banks have been in the news for all the wrong reasons. We have seen queues outside Metro Bank, and it recently emerged that the Bank of England tried to prevent the prosecution of executives at Barclays for not disclosing the funding the bank received from Qatar during the financial crisis.

Stock returns have also been disappointing, with HSBC, Barclays, RBS, Lloyds and Standard Chartered all lagging the stockmarket over the last decade. However, look beyond the headlines and you will see that the major listed British banks have been grappling successfully with the legacy of the financial crisis, putting their houses in order in advance of any economic downturn, fending off competition from challenger banks, and getting down to the important task of growing revenues and profits.

Recovering from the financial crisis

Concerns that British banks haven't properly dealt with the legacy of the financial meltdown of 2007-2008 are clearly having an impact on the sector. Even though the crisis was over a decade ago, "it has taken a long time for the public to forgive the banks for what took place in 2007-2008", says David Miller of Quilter Cheviot Investment. Recurrent negative publicity over various cases of misconduct, notably the scandals over the fixing of Libor (a key interbank lending rate) and the mis-selling of payment protection insurance (PPI), have hardly helped.

Still, the good news, according to Miller, is that "there's a big difference between how British banks are perceived by the public and how they are regarded by their peers and compared with institutions in Europe and America, British banks have a good reputation". For example, regulators have forced them to increase the capital set aside to cover losses on loans. The buffer between assets and loans is far higher than the rules stipulate.

The average Tier 1 capital ratio (a key gauge of financial strength measuring equity capital as a proportion of overall assets) has more than doubled since the crisis to 18% today; the regulatory minimum is 10.5%. This means that banks could still survive even if the value of their assets fell by nearly one-fifth. More generally, there's been a "dramatic change" in the culture, which means that "they are now run in a much more prudent way".

Less legal hassle

The huge amount of money that British banks have paid out in fines and settlements may not have been good for their bottom line, but at least it means that the remaining legal risk has "greatly diminished", says Simon Gergel of Merchants Trust. Even though there is still a chance that there could be a surge of PPI claims in the run-up to the deadline (29 August), banks are "getting to the end of the process". While legal risk "will never completely go away", much tighter compliance means that "the potential losses from fines and lawsuits should be significantly lower than they were before".Of course, there are still "pockets of concern", such "as loosening credit standards" in unsecured store-cards and zero-percent balance transfer cards, says Philip Matthews, co-portfolio manager of the TB Wise Multi-Asset Income Fund. However, balance-sheet quality "appears to have been demonstrably improved".

Overall credit standards have also been tightened, "considerably reducing the riskiness of the assets held on banks' balance sheets". Far fewer high loan-to-value mortgages have been written compared with ten years ago. Banks have retained less of their leveraged loan exposure on their own balance sheets. The average unsecured loan exposure is lower and the banks have "pulled back from very high risk commercial real-estate lending".

Liquidity, meanwhile, has vastly improved. One of the key causes of the crisis was that banks moved away from relying primarily on customers' deposits to meet short-term obligations and instead started to lean on external money markets. Indeed, just before the crisis started they typically had only enough liquid assets, such as cash and short-term debt, to cover six weeks' worth of funding. This caused huge problems when the money markets suddenly dried up from the summer of 2007 onwards. By contrast, today they have "sufficient liquidity to cover two years of wholesale funding outflows", says Matthews.

Well prepared for a slowdown... if one comes

Investors also shouldn't worry too much about the possibility of a slowdown hitting the banking sector, reckons Gergel. The changes that the banks have been forced to make will ensure they are well prepared.

From the start of last year, the Bank of England has forced banks to follow new global accounting standards that require them to make provision for any potential losses in advance of any downturn rather than as it happens. This should pre-empt nasty surprises for investors and temper concern over systemic problems once a downturn arrives. While such provisions are currently having a negative impact on banks' balance sheets, it looks as though it will be "relatively minor".

Besides, there is no guarantee that the recession many people are expecting will actually take place. Even the potential impact of Brexit has been overstated. While the potential loss of the right to sell financial services across the EU will affect investment banks, it will have scant impact on retail banks. It's also important to remember that HSBC and Barclays are global banks with offices and operations around the world. So neither Brexit disruption nor a British downturn will particularly hurt their bottom line.

A Brexit boost?

What's more, if Brexit ends up being softer than expected then a great deal of pent-up demand will be released, boosting the economy and banks' balance sheets. "We've been living with Brexit for three years, so banks have had plenty of time to prepare for the worst," says Miller. Indeed, as part of the new, tightened regulatory regime, banks are regularly required to undergo "stress tests", which examine the effect a recession or a sudden drop in house prices has on their balance sheets.

All the major banks have repeatedly passed the tests, which suggests that a slowdown should be relatively easy for them to deal with. Rather than worrying about an economic slowdown that may never occur, investors should be more concerned by the fact that the Bank of England's enthusiasm for interest-rate rises seems to have dissipated. Higher interest rates are generally good for banks because they can earn more on their loans.

However, interest rates could rise unexpectedly quickly if inflation suddenly picks up a scenario that could take central banks by surprise, as we have often pointed out over the last few months.

Challengers' challenge overstated

British banks have also had to deal with new competitors. Since the crash, several "challenger banks" have emerged that aim to steal business from the incumbents. The government has encouraged the newcomers, such as Metro Bank, on the principle that increased competition will force existing banks to offer better service and more value for money. Two years ago RBS announced that it was setting up two funds, with a total value of £775m, to make it easier for small businesses to switch to challenger banks, as well as to encourage financial innovation more generally.

But while it would be wrong to write off the newcomers, the evidence suggests that the challenge they pose to the main players has been overstated. The recent turbulence at Metro Bank indicates that banking "is a matter of confidence and scale, so the challenges are more towards the newcomers than the big four", says Helal Miah, investment research analyst at The Share Centre.

Matthews believes they don't pose a significant challenge to the big players. After all, challenger banks "have disadvantages of their own... rapid levels of growth bring with them operational issues, as well as potential credit issues" if an unexpected economic downturn materialises.

Co-opting technology

A more significant long-term threat to the established institutions comes from financial technology (fintech) companies, which aim to use software or artificial intelligence to steal business from banks or make them obsolete. "We are in the middle of a wave of technological disruption," admits Georg Ludviksson, founder and chief executive of software company Meniga, which helps retail banks in the UK and Europe deal with the impact of technological change.Still, investors in the big institutions should be reassured by the fact that they are working extremely hard to stay on the cutting edge of technology, so that if there is a technological revolution, they are not being left behind. Indeed, not only are the main banks "fighting back by copying what the challengers are doing", but they are also "taking the initiative". Certainly, "all the banks realise that where technology is concerned they have to move faster and change", and as a result "most of them are making a lot of progress".

In fact, technological change in banking could end up helping big British banks more than it hurts them. Ludviksson points to the example of telecom firms such as Three, which have used the power of their brands to reinvent themselves as sales and marketing powerhouses, allowing them to outsource more capital-intensive, lower-margin tasks.

In that scenario, the big players could end up partnering with fintech firms to focus on those parts of banking that are more profitable. Even in the worst-case scenario, the traditional banks are hardly going to be supplanted in the near future. The fintech sector will only succeed by concentrating on niches "and then scaling up". It should avoid trying to "replicate everything that banks currently do".

Returning to profitability

Not only are the fears surrounding the British banking sector overblown, but there are also some compelling positive reasons for investing in it. Having absorbed nearly £100bn of costs, banks "are much better positioned to pay dividends or undertake share buybacks", says Matthews. Despite intense competition, traditional retail-banking activities remain highly profitable. One particularly lucrative area is mortgages, "with new business generating returns well above the cost of capital". This has been especially good news for Lloyds, which has used its strong focus on these bread-and-butter areas to generate "strong" returns on equity.

Things have been a little more complicated for the corporate and investment banking divisions of the major British banks. One of the big problems is that investment banking is a much more global industry, which means that British and European firms are competing "against large-scale US banks with less punitive regulatory regimes". The investment banking divisions of RBS and Barclays are "well off their return aspirations", leading to calls for Barclays to spin off its investment-banking arm. However, both banks are having some success in cutting costs, which should make it easier for them to boost margins and return on capital.

There are some other potential areas of growth that banks are starting to explore. A greater emphasis on investment advice and financial products that will help people plan for the future should pay dividends. "It's clear that people are being expected to take more responsibility for their own financial security, so if you can offer good advice then you are in a good position," says Miller. He also notes that banks such as HSBC, which derives most of its revenue from outside the UK, have an opportunity to expand this business in fast-growing areas of the world, such as Asia. Standard Chartered, another global player, has the same opportunity.

A sector for income seekers

One indication that the British banking sector is in much better shape than it was a few years ago, and has finally put the legacy of the great financial crisis behind it, is the increase in the level of profits. According to data from The Share Centre, last year the listed UK banks made a collective profit of £27.7bn, nearly triple the levels of £9.5bn five years ago. While this is still below the record level of £34.4bn in 2007, dividends have also increased sharply from £7.7bn to £11.6bn during the same period. The combination of falling share prices and rising profits has resulted in enticing dividend yields, especially compared with other industries.

The banking sector's best bets

HSBC (LSE: HSBA) is the largest UK bank by market capitalisation, and one of the largest banks in the world. The fact that it derives 85% of its revenues from outside Britain means that it should be insulated from any downturn in the UK economy and should also benefit from growth in emerging markets, especially in Asia. Despite this, it still trades at only 11.2 times 2020 earnings and yields an attractive 6%.

One British bank that should also benefit from growth in emerging markets, but is trading at a much bigger discount than HSBC, is Standard Chartered (LSE: STAN). Around 90% of Standard Chartered's revenues come from the Middle East, Africa and Asia, giving it exposure to some of the fastest-growing parts of the global economy. Its increasing profitability has enabled it to announce that it will spend £770m buying back shares. It trades at a discount of 47% to its book value and offers a dividend yield of 3%.

Barclays (LSE: BARC) is in the middle of a public row between activist shareholder Edward Bramson who wants either to shut down or divest the investment banking division and chief executive Jes Staley, who opposes such a move. Staley seems to have won the argument for the moment and has made some changes designed to give him more direct control of the division. More broadly, Simon Gergel of Merchants Investment Trust thinks that Staley is doing a good job of cutting costs and reducing the level of debt. Barclays trades on a 2020 price/earnings ratio of 6.5, with a dividend yield of 4.7%.

Lloyds (LSE: LLOY) was one of the banks, along with RBS, to receive a bailout from the government. It resulted in the Treasury taking a 43% stake in the company. However, two years ago the final tranche of government shares in the bank were sold, which means that is now completely free from government interference.

David Miller of Quilter Cheviot Investment believes it's made "good progress" in pushing through the structural changes needed for the institution to prosper, as shown by the 8% return on equity, a key gauge of profitability. It currently trades at a yield of 6%, and said that it now feels confident enough to start paying dividends quarterly rather than annually.

One challenger bank worth considering is CYBG (LSE: CYBG), which was formed when National Australia Bank decided to sell off Clydesdale Bank and Yorkshire Bank and float them as a separate company. Last year, CYBG bought Virgin Money (which owned Northern Rock), which should help increase its asset base and diversify its business away from mortgages.

While it unexpectedly failed to gain any money from the banking competition fund set up by RBS (it went to Metro Bank), management has promised to outline a detailed medium-term plan for growing the bank. CYBG trades at 7.3 times 2020 earnings and yields 3.7%.

If you're asked to picture a private bank, the things that spring to mind may be marble halls, subterranean vaults, hushed voices and perhaps Swiss accents. Today's private banks are, of course, more high-tech but the reasons for people using private banks don't seem to have changed much over the years. Some might use a private bank because they consider it to be prestigious; some might want the high-class service; while others like the perceived discretion.

As the word "private" implies, this type of bank has long held a reputation for privacy and secrecy. Although much of this has changed since the cultural shift towards a more transparent digital-banking system, some banks remain strictly private. As the PR person of one well-known bank told me, "the nature of the discreet relationships we have with our customers means we don't disclose information on levels of wealth or services", and therefore have "no wish to appear in your article". But is being a client with a private bank worth the high fees, or is it simply a tax on snobbery?

Banking for the affluent

The boundaries of private banking can be tricky to pinpoint. In the most traditional sense, private banks are independent banks that were originally family run and founded in the 17th or 18th century, such as Weatherbys or C. Hoare & Co. But today, many high-street banks such as Lloyds, HSBC and Barclays provide "premium banking" or "private banking" services.

What these private banks have in common, though, is the requirement for customers to be sitting on a certain amount of money. At Brown Shipley, private clients need to have "investable assets" which means money that is not tied up in your main residence of at least £500,000. At Arbuthnot Latham you need to have investable wealth in excess of £1m. Coutts' clients have to invest or bank about £1m, or earn half a million a year.

At the private-banking arms of high-street banks the threshold is lower. To qualify for HSBC Premier, you need to have savings or investments of at least £50,000 with HSBC in the UK; or an annual income of at least £100,000, in conjunction with a mortgage of at least £300,000, or another product taken out through its financial advisory service. At Lloyds, customers typically have at least £250,000 in savings, investments or personal pensions, or a sole annual income of at least £250,000.

If you're considering going to a private bank, it helps to know what level of service you can expect. Some private banks, such as Brown Shipley and Arbuthnot Latham, can offer a wide range of advisory services, including advice on tax-efficient investments, estate and inheritance-tax planning, pensions and investment management. "We use cash-flow forecasting to demonstrate to clients how they will be able to fund their future," says Liz Bottomley of Arbuthnot, when asked how it compares with high-street banks' private services. "We spend time with our clients to really get to know them and we continue to offer a high-touch personal service throughout our relationship. We are not bound by the constraints of a box-ticking approach."

Private banks: Four Seasons versus the Premier Inn

For some, the appeal of private banking lies in other perks. "Clients like being in the club'," says Stuart Newey, head of banking at Coutts, comparing the bank to a private members' club. The bank is beginning to host more events where clients can network with each other. Coutts was established in 1692 and has provided the royal family with banking services since Queen Anne's reign although as Newey points out, "We have a network of entrepreneurs not just royalty". Today Coutts is part of the RBS group. It provides banking, lending and investment services, including early-stage investment opportunities and wealth services relating to inheritance tax, philanthropy and the running of a family business. The bank also provides financial education for clients' children after all, "80% of wealth doesn't reach the third generation", says Lenka Setkova, head of Coutts Institute.

Unsurprisingly, Coutts' services are geared towards a certain type of customer. For example, "If a client buys a car in a showroom, it's not a problem", Newey explains in contrast to retail banks, which have more constraints when it comes to transactions involving large sums. Similarly, if clients travel, they don't need to ring up the bank to warn Coutts they're going abroad. Another advantage is that Coutts can easily cope with clients' complex financial histories. At a retail bank, Newey argues, "you get the same fraud profiling, and you're using the same phone lines as everyone else". At Coutts, an online algorithm recognises whether it's the client who is using online banking by how they use their keyboard, how they swipe and what language their phone is set to. As Newey puts it, describing the difference between the high street and traditional private banks, "The Premier Inn and the Four Seasons both provide a bed you can sleep in, but the latter knows what settings you like".

As the range of private-banking services increases, so do the fees. That said, charges vary widely across the industry, says Lee Goggin of FindaWealthManager.com. Some banks will charge 1.75% of assets under management, says Goggin. While it's hardly bargain-basement levels, it may well be significantly lower than you might be charged "by an independent financial adviser, who will often outsource the management of portfolios to a wealth manager and then charge a hefty premium on top for their advice", he says. Unfortunately, it's not easy to compare costs many private banks only specify fees upon application, and there are no "comparison sites" for private banking. However, as an example of what to expect, at a more basic level, for a "sole banking relationship" at Coutts you can expect to pay an annual tariff of £900, charged quarterly, while C. Hoare & Co. charges £60 a month for each current account held, though these fees can be waived if you hold more than a certain minimum amount with the bank in question.

High-street banks get in on the action

Even if you decide just to use the private-banking service of a high-street bank, the expectation is that you will still get better service than if you pop into a branch at lunchtime to pay a bill. At HSBC, for instance, you get a "dedicated relationship manager". At Lloyds it's an "advice manager" who can help clients draw up a financial plan, providing advice on areas including investments, planning for retirement, wealth and inheritance tax.

Challenger banks have also moved into the private-banking sector. Metro offers a private-banking service to those with £1m of assets or borrowings with the bank, which can include a mortgage. "We don't do investment advice or insurance sales," says Julie Barnsley, head of private banking at Metro. "We just do the banking bit" which includes current accounts, savings, mortgages and loans, coupled "with an old-fashioned relationship service". Its managers are recruited from other private banks, and they have around 40 to 60 customers each. For an entrepreneur, a manager might oversee their personal banking and that of their family, the trading of the business, and the lending for a portfolio of properties.

This certainly sounds a far cry from the anonymous treatment and sometimes garbled responses I get as a normal client with my bank. The closest I came to premium treatment was when my mortgage adviser was 30 minutes late to an appointment and promised me a bottle of wine and chocolates as an apology. They never arrived.

So should you use a private bank?

This is probably the key attraction of a private bank the relationship. Indeed, when a 2015 Deloitte survey with private banks and wealth managers asked what would most differentiate their institution from others in the next five years, the overwhelming majority answered: "client relationships". "In many cases, when clients leave an institution, it is because of a lack of understanding with the relationship manager and not investment performance," reported the survey. So if you're looking for a personal manager for your finances, for a one-stop financial shop, or you're keen to network at client events through your bank, then private banking might be for you provided you can afford it. But otherwise, these services could be unnecessarily expensive. If you take a more hands-on approach with your finances, or if low cost is your first priority, it might be better to give it a miss.

Lloyds "has dealt a blow to existing customers by hacking at the rewards for its popular Avios Rewards credit cards", says Emma Gunn on ThisIsMoney. Lloyds closed its Avios Rewards scheme to new members back in May and it is now cutting how many Avios points existing members can earn from 1.25 per £1 spent to just 0.4 per £1.

This doesn't mean you should ditch your Lloyds card. "You won't find a better Visa or Mastercard earning rate," says Gunn. But if you switch to American Express, you could earn one Avios per £1 spent with the free BA American Express card; with the Premium Plus BA card, you will get 1.5 points per £1 spent.

If you'd rather not be tied to the Avios system, MoneySavingExpert recommends the American Express Preferred Rewards Gold card, which enables you to convert points into air miles. You earn one mile for every £1 spent, plus 20,000 bonus points if you spend £2,000 in the first three months.

Alternatively, you can spend the money earned with a cashback card wherever you like. The Amex Platinum card pays you 5% cashback for the first three months, then up to 1.25% depending on how much you spend.

There's no point sticking with a bank that offers a bad deal. Make sure you move when rates are cut.

Lloyds is cutting the interest rate on its Club Lloyds and Bank of Scotland Vantage accounts from 2% to 1.5% in July, while also hiking the monthly fees on all packaged bank accounts offered by Halifax, Lloyds and Bank of Scotland by £2 a month. For loyal Lloyds customers, this could be a good time to see if you can do better with another bank.

If you tend to keep a reasonable amount of money in your current account, then make sure you are being rewarded with a decent interest rate. The best you can get is 5% on balances of up to £2,500 with Nationwide's FlexDirect account. You need to pay in at least £1,000 a month. Be aware that the rate drops to 1% after 12 months, so you'll need to shop around again then.

Alternatively, Tesco Bank pays 3% on up to £3,000 on its current account. To get that rate, you need to pay in at least £750 a month and have at least three direct debits going out of the account every month. Tesco allows two accounts per person, so a couple could secure a 3% interest rate on up to £12,000.

If you don't keep a lot of money in your current account, then you may be better off banking a switching bonus instead of going for the top interest rates. M&S Bank is offering a £125 gift card to new switchers to its current account. There is no minimum monthly deposit, but you must have at least two direct debits set up. The account pays no interest. However, if you deposit at least £1,000 a month, then you'll get an extra £5 a month added to your gift card for 12 months.

If you'd rather have the cash, Halifax is offering a £75 switching bonus if you move to its Halifax Reward account. On top of that bonus, you'll get a £3 a month reward if you pay in £750 a month, don't go into your overdraft and pay out at least two direct debits. Just note that you won't get the bonus if you've received a switching incentive from Halifax since January 2012.

Anyone looking for a new current account to pay their household bills from should take a look at Santander and NatWest. Both banks have current accounts that give cashbacks on bill payments. Santander's 123 Lite account gives between 1% and 3% cashback on direct debits to pay bills. The 3% rate is for phone, broadband, mobile and TV bills, with 2% paid on gas, electricity and Santander insurance, and 1% on water, council tax and Santander mortgage payments.

You need to pay at least £500 a month into the account and have at least two direct debits set up to get the cashback. There is also a £1 monthly fee. NatWest's Rewards Account has a £2 a month fee, but pays a flat 2% cashback on the same range of bills as Santander. However, you have to pay at least £1,500 a month into this account.

Finally, if you want a current account that comes with added benefits, then Nationwide's FlexPlus account is the best package by far. It offers worldwide family travel insurance up to the age of 74, family smartphone insurance, and UK and Europe breakdown cover. The account costs £13 a month, but the travel insurance alone could cost more than that if you got a separate policy.

The breakdown cover is for the account holder driving any car and the mobile insurance covers loss, theft, damage and breakdown of all phones owned by you, your partner or dependent children at the same address, provided the phone isn't worth more than £1,000. On top of all that, the account pays 3% a year on up to £2,500 for 12 months.

Pocket money TSB fiasco drags on

TSB customers were still struggling to access their accounts on Wednesday, despite assurances from the bank's chief executive that its internet and mobile-banking services were up and running, says Angela Monaghan in The Guardian. TSB had warned customers to expect disruption over the weekend while it switched from a platform rented from its former owner Lloyds to its own platform, but the problems continued well into this week.

If you've been affected by these over the past few days you can claim compensation for any losses incurred, including any charges for late payment, and knock-on costs such as credit-card interest, says The Daily Telegraph. There is also scope to claim for "non-financial harm", such as the stress caused. You can ask the bank to have your credit file corrected if not being able to access your account leads to problems with your credit score.

Car-insurance prices have fallen for the first time in three years, but most drivers are not being offered cheaper rates when their insurance comes up for renewal, says Annabelle Williams in The Times. Insurance premiums rose when the government changed the way compensation payments were calculated, meaning insurance firms faced bigger payouts but a review of this change should mean payouts will fall. Make sure you shop around when it's time to renew your policy never accept a renewal without checking it's competitive.

Online estate agents are cheaper than traditional firms, but they accounted for just 6% of sales last year, up from 5% in 2016. One reason for the slow take-up is that online agents tend to ask for payment up front, so sellers feel there is less incentive for the agents to chase a deal once they have handed over the money, says Ali Hussain in The Sunday Times.

Online agents charge a flat fee, unlike high- street agents who typically charge around 1.5% of the sale price. The huge cost savings "can be tempting and the lack of a presence on the high street is not necessarily a problem given that most people's property searches begin online" although some argue that a traditional agent can play a valuable role in ensuring a sale gets from offer to completion.