Interest rates were lowered to yet another all-time low of just 1 per cent last week, and as a result even those savers with large sums to deposit are really feeling the pinch.
Against the backdrop of the Bank of England's cuts, any chance of getting a half-decent return on a deposit savings account is going to appeal. An auction site called MaxBips.com provides an alternative way for savers to hunt out a better rate.
Launched last week, MaxBips works on the basis of savers with at least a £30,000 sum to deposit offering that cash up for an auction among banks, specifying for how long they are willing to tie up the money. A host of institutions – including big names such as Lloyds, Barclays, HSBC and Anglo Irish – look at what's on offer and then have a chance to register a bid. Auctions last for half an hour.
After this, you will be sent an email with a summary of the various bids and you will also be offered access to information on credit ratings, terms and conditions and the annual reports of the institutions. You then have a further half an hour to review and compare the various bids.
During the auction process, you remain anonymous to the bidders. If you decide to accept a particular rate, MaxBips will pass on your details to that bank, which will get in touch to arrange the deposit. MaxBips does not hold saver cash at any time.
For banks, the automated service provides the opportunity to get their hands on large deposits quickly and easily. Similarly, savers have immediate and simple access to fixed-rate quotes – and in particular to quotes that change from day to day and would usually take time and effort to gather.
Only banks covered by the UK Financial Services Compensation Scheme or European Economic Area "passported" schemes, such as the 100 per cent guarantee for Irish banks, are invited to bid on deposits. "Two things are of the utmost concern in the minds of depositors: the security of their funds and the diminishing returns on their savings," says Aloysius Fekete, managing director of MaxBips's parent company, Alox.
"The site provides rates that are not normally available publicly and could be better than the rates savers are currently receiving," he says.
Despite this, there is still need for caution while MaxBips is in its early stages. There is no guarantee that the deals will be any better than those already widely accessible by the public, and the risk for depositors is that they could be paying £49 for a useless subscription.
The Independent on Sunday used a "Rate Indicator" tool on the site to see what bids a potential deposit amount and term attracted the day before. We found that £30,000 drew bids from eight banks, with rates ranging from 1.09 to 4.3 per cent. When you consider that ICICI is currently offering 4.3 per cent with its HiSave fixed-rate Account, which requires a minimum deposit of just £1,000, it would seem MaxBips still has some issues to address.
The success of the service will depend largely on how many banks are willing to bid, and it could well be that only very large deposits attract any interest. "Not all institutions have yet signed up to this service, but I suspect as it gathers pace and banks lose deposits to those that are on the service, it will grow," says Lee Robertson, the chief executive of wealth management group Investment Quorum.
Additionally, with the minimum deposit set at that hefty £30,000 (and no maximum limit), this site is predominantly aimed at high net-worth individuals and small firms. "MaxBips will appeal to wealthier savers and also those who are comfortable with using the internet for their financial research," says Martin Bamford, a chartered financial planner at adviser Informed Choice.
However, there could be a way for those individual savers who would normally be put off by the high minimum deposit to gain access to the rates offered through MaxBips.
"A potential use of the system in the future could be financial advisers forming syndicates for their clients," says Mr Bamford. "This would reduce the minimum deposit required for each individual client, offering access for a wider range of savers."