OVERVIEW The effective interest rate is the weighted average of all the interest rates across each type of deposit or loan account held by all the clients within an economic sector. The Bank calculates average effective rates as weighted averages of the effective interest rates supplied by each of the reporting institutions.
Data are available monthly from January 2004. The data are not seasonally adjusted. Publication of data occurs on the 21st working day of each month on the Interactive Database, please follow this link
http://www.bankofengland.co.uk/mfsd/iadb, and in Bankstats table G1.4. See the
schedule of releases.
These data are sourced from the Bank's Effective Interest Rates Return,
Form ER, completed by 23 MFIs. The sample is reviewed regularly to ensure that it remains representative of banks and building societies' lending to and deposits accepted from UK-resident individuals and organisations. The sample is designed to give a coverage target of around 75% for MFIs' business within each of the main sectors of the economy.
The reporting institutions are selected from a population of around 400 UK-resident MFIs using stratified sampling techniques, where each stratum represents an economic sector or product type. To achieve the 75% target with the fewest reporters – and thus limit the cost burden on the banking industry – the largest institutions by market share were selected within each stratum.
All data are subject to revision if and when new data become available. Revisions are highlighted where data have been revised by more than the thresholds set when compared to previously published data. The thresholds are set so that, historically, the most significant 10% of revisions greater than one basis point would be flagged.
Unless otherwise stated revisions to data are due to changes to the underlying contributors’ reported data. For more information on revisions practices see the Explanatory Note on revisions, available
here.
Effective rate calculation
Effective rates are calculated as a function of average loan/deposit balances and interest payable/receivable on those balances. It is expressed in the following terms:
Interest Flow No. of days in Year
x x 100
Average (daily) No. of days in
Balance Month
For example, if, during January 2005, a bank on average held £50 billion of household savings deposits, on which interest totalling £150 million was payable, the effective interest rate would be:
£150mn 365
x x 100 = 3.53%
£50bn 31
The deposits might be held in millions of separate accounts with numerous different terms and interest rates, none of which might actually be 3.53%. The effective interest rate is the weighted average of all the interest rates across all the deposit accounts held by all the clients within this economic sector. The Bank calculates average effective rates as weighted averages of the effective interest rates supplied by each of the reporters.
Sectorisation
Households and Individual Trusts
This sector is sub-divided into two groups: Individuals & Individual Trusts and Unincorporated UK Businesses other than Unlimited Liability Partnerships. The inclusion of unincorporated businesses resident on the UK mainland other than unlimited liability partnerships (i.e. sole traders) was a direct result of the implementation of the European System of Accounts 1995 (ESA95) at the end of 1996. This sector therefore has a wider coverage than the former sector ‘individuals and individual trusts’.
Products
Sight deposits
Sight deposits (instant access deposits) are interest bearing accounts (be it branch based, business, Internet, telephone or postal accounts) where the depositor has access to the entire balance of the deposit, without incurring any penalty, either on demand or by close of business the day following that on which the deposit was made.
Time deposits
Time deposits are interest bearing deposits that are not classified as sight deposits. These are deposits where only part of the balance is accessible without penalty, either on demand or by close of business on the day following that on which the deposit was made. Postal deposit accounts (excluding those with alternative instant access arrangements such as via ATMs or immediate transfer to a sight account e.g. by telephone or Internet) are also classified as time deposits. This is due to the postal element resulting in a delay in the customer using the money even if the reporting institution responds to their request by return post.
Some reporting institutions operate deposit products which do not pay interest monthly but instead offer a single interest payment after 12, 24 or 36 months linked to the performance of an index such as the FTSE100. The balances on these products and the single interest payment are included in the rates calculations without adjustments so may affect some of the rates published for time deposits. We will review this treatment in the future.
Loans secured on dwellings (excluding bridging loans)
These include all mortgage loans to individuals (apart from bridging loans) secured on properties. Loans for home improvements, house repairs and maintenance also secured by a first charge over the property, and mortgage sub participations fully and specifically secured against residential mortgage loans are also included. This average rate also includes some preferential rate loans such as staff mortgages from the reporting institution. However, these only account for a very small proportion of the total.
VALUATION AND BREAKS
The Bank of England began collecting effective interest rates from a panel of UK resident banks in 1992. The main purpose then was to meet the needs of the Office for National Statistics in the compilation of the national accounts. During the 1990s demand from monetary policy users grew, for example in monitoring the impact of changes in the official interest rate, the Bank Rate. The survey became monthly in 1998 and was made statutory under the Bank of England Act in 2000. The results have been published in Table G1.4 since February 2001. In January 2004 the Bank expanded the sample of reporting banks and introduced an expanded survey form to meet users’ needs for more detailed information.
Due to the new form, the sample was expanded in January 2004, and improved calculation methodology adopted by reporting banks. This means that a direct comparison between December 2003 and January 2004 cannot always be made. For series starting in 1999 the Bank estimates that these improvements had the following effects on the January 2004 rates:
| Series |
Effect of improvements in January 2004 (pp) |
Series |
Effect of improvements in January 2004 (pp) |
| HSCP |
0.20 |
HSCZ |
0.50 |
| HSDM |
0.20 |
HSDO |
0.00 |
| HSCR |
-0.10 |
HSDA |
0.00 |
| HSCT |
0.10 |
HSDC |
-0.10 |
| HSCV |
0.20 |
HSDI |
-0.10 |
| HSCX |
0.20 |
HSDK |
0.00 |
| HSCQ |
0.20 |
HSDB |
0.00 |
| HSDN |
0.20 |
HSDH |
0.00 |
| HSCS |
0.10 |
HSDJ |
-0.20 |
| HSCU |
0.10 |
HSDD |
-1.00 |
| HSCW |
-0.10 |
HSDE |
-0.10 |
| HSCY |
0.10 |
HSDG |
0.30 |
In January 2010, the Bank expanded its published data to include data collected from building societies in addition to the data from banks already being collected and published.
Therefore, from January 2010, the published data are combined bank and building society rates for all series instead of a bank only rate. As a consequence of this change, some of the rates were affected, a summary of which is given below:
| Series |
Effect of bringing in building societies in January 2010 (pp) |
| CFMHSCW |
0.11 |
| CFMBJ66 |
0.13 |
| CFMBI38 |
0.15 |
| CFMBJ76 |
0.17 |
| CFMBI62 |
0.19 |
| CFMBI63 |
0.16 |
| CFMBJ74 |
0.27 |
| CFMBI84 |
0.11 |
| CFMBI85 |
-0.13 |
| CFMBI86 |
0.23 |
| CFMBJ37 |
0.24 |
All other series were not materially affected.
In addition to these changes, the Bank will no longer publish series for Banks (including Central bank) and Building Societies as counterparties, but will replace these with an MFI series. The following table lists the affected series:
| Series |
New/discontinued series following the introduction of building societies in January 2010 |
| CFMBI28 |
Discontinued from Jan-10 |
| CFMBI29 |
Discontinued from Jan-10 |
| CFMHSDM |
Discontinued from Jan-10 |
| CFMBHSDN |
Discontinued from Jan-10 |
| CFMB2HW |
Introduced in Jan-10 to replace CFMBI28 and CFMHSDM |
| CFMB2HX |
Introduced in Jan-10 to replace CFMBI29 and CFMHSDN |
| CFMBI57 |
Discontinued from Jan-10 |
| CFMHSDO |
Discontinued from Jan-10 |
| CFMB2HY |
Introduced in Jan-10 to replace CFMBI57 and CFMHSDO |
More information on the changes to the publication of bank and building society statistics can be found
here.
Securitisations Reporting
From January 2010 data onwards, all loans that have been securitised by MFIs will be included on the institutions’ balance sheets for statistical reporting purposes. Some institutions reported securitisations on balance sheet prior to 2010, so their reporting did not change. However, other institutions brought back on to their balance sheets loans that had been securitised in the past.
This caused a level shift in various balance sheet series in January 2010, however there was little effect on the published effective rates with the exception of CMFBI65 (Stock household loans secured on dwellings, fixed <=1yr) which increased by approximately 25bps.
Publication of additional series
The Bank of England provides UK MFI data to the European Central Bank (ECB) to form part of the MFI Interest Rate dataset. The ECB requires different product breakdowns than those previously published by the Bank of England. As the ECB recently began to publish these data as part of the MIR dataset, the Bank of England has also added these series onto the Interactive Database. The extra series and their codes are shown in the following table:
| Series |
Description |
| CFMB2CP |
Monthly average of UK resident monetary financial institutions' (excl. Central Bank)
sterling weighted average interest rate, time deposits with fixed original maturity <=2yrs from households (in percent) not seasonally adjusted |
| CFMB2CT |
Monthly average of UK resident monetary financial institutions' (excl. Central Bank)
sterling weighted average interest rate - time deposits redeemable at notice <=3 months from households (in percent) not seasonally adjusted |
| CFMB2CU |
Monthly average of UK resident monetary financial institutions' (excl. Central Bank)
sterling weighted average interest rate - time deposits redeemable at notice >3 months from households (in percent) not seasonally adjusted |
| CFMB2CQ |
Monthly average of UK resident monetary financial institutions' (excl. Central Bank)
sterling weighted average interest rate - time deposits with fixed original maturity <=2yrs from private non-financial corporations (in percent) not seasonally adjusted |
| CFMB2CR |
Monthly average of UK resident monetary financial institutions' (excl. Central Bank)
sterling weighted average interest rate - time deposits with fixed original maturity >2yrs from private non-financial corporations (in percent) not seasonally adjusted |
| CFMB2CV |
Monthly average of UK resident monetary financial institutions' (excl. Central Bank)
sterling weighted average interest rate - new time deposits with fixed original maturity >1yr<=2yrs from private non-financial corporations (in percent) not seasonally adjusted |
| CFMB2CS |
Monthly average of UK resident monetary financial institutions' (excl. Central Bank)
sterling weighted average interest rate - loans secured on dwellings with initial fixation >5yrs to households (in percent) not seasonally adjusted |
| CFMB2CW |
Monthly average of UK resident monetary financial institutions' (excl. Central Bank)
sterling weighted average interest rate - other loans, new advances, on a floating rate and with initial fixation <=1yr to households (in percent) not seasonally adjusted |
| CFMB2CX |
Monthly average of UK resident monetary financial institutions' (excl. Central Bank)
sterling weighted average interest rate - loans secured on dwellings, new advances on floating rate and with initial fixation <=1yr to households (in percent) not seasonally adjusted |
Changes implemented from January 2011
Following completion of the five-yearly review of Form ER (announced in February 2010), the variables for which data are collected have been optimised so that less detail will now be available for the Public Corporations and NPISH sectors, and more detail is now being collected for Household deposits and secured lending. On the corporate lending side, short-term loans (less than 30 days) are excluded from new lending rates, and intra-group business is excluded from all areas.
In addition, as the result of a regular optimisation of the ER sample, changes in population and reporting have been implemented from January 2011. The series showing effects greater than 0.1pp are listed in the table below.
| Series |
Effect of sample optimisation in January 2011 (pp) |
| CFMHSDD |
-0.12 |
| CFMHSDP |
-0.25 |
| CFMBJ77 |
-0.20 |
| CFMBI73 |
-0.21 |
| CFMBI74 |
-0.18 |
| CFMBJ93 |
-0.17 |
| CFMBJ94 |
-0.41 |
| CFMBJ49 |
-0.68 |
| CFMBJ52 |
-0.39 |
The distribution of balances from effective interest rates data
( Bankstats G1.5 and IADB) show the percentage share of MFI business by different loan and deposit types, and maturities, for households and PNFCs. These data are based on balances from Form ER, on a quarterly basis from the first quarter of 2004.
The tables provide information on the following:
- Household time deposits, new and outstanding, by initial maturity;
- Household unsecured loans, new and outstanding, floating vs. fixed, and fixed by initial maturity;
- Household loans secured on dwellings, new and outstanding, floating vs. fixed, and fixed by initial maturity;
- PNFC time deposits, new and outstanding, by initial maturity;
- PNFC loans, new and outstanding, floating vs. fixed, and fixed by initial maturity.
They are based on average balances of outstanding business and flows of new business during the month, by type of loan and deposit. In contrast to the MFI sector balance sheet statistics published elsewhere in Bankstats, the effective rates balances relate to average balances during the month rather than end of month positions; and the population is the ER reporting sample, rather than the entire MFI sector.
Relevant material published: