OVERVIEW
Quoted interest rate series are calculated monthly, as weighted averages for a range of lending and deposit products offered to households. The headline rates advertised by a sample of banks and building societies are collected and weighted together using the monthly balances, or new business volumes, reported by those institutions on Bank of England statistical forms.
Quoted rates are published monthly as provisional data on the 7th working day of the following month, on the Interactive Database, and as final data on the 21st working day on the Interactive Database and in Bankstats table G1.3. See the schedule of releases.
Rates published on the 7th working day are provisional as they are weighted using the previous month's balances or new business amounts, plus they may not include all rate changes that occurred up to the end of the month. Final data consist of end month rates weighted using the relevant current month’s balances. The provisional rates are therefore often revised when published on the 21st working day. The data published on the 21st working day represent end month quoted rates
Data are generally available monthly from January 1995, although a number of deposit series start in January 2011.
The data are not seasonally adjusted.
Each series is a weighted average derived from interest rates for relevant products offered by a sample of the largest banks and building societies. The sample is based on that used for Form ER (Effective Interest Rates), and based on monthly balance sheet returns to the Bank, the coverage is as follows,
· 90% of all banks and building societies gross mortgage advances to households;
· 95% of total credit card advances;
· 80% of unsecured personal loan advances and overdraft amounts outstanding; and
· 85% of household sight and time deposit balances.
Advertised rates used in the compilation of these series are generally selected from Moneyfacts, an independent service that provides rate and product information for mortgages, unsecured lending and deposit rates. Individual bank and building society information may also be used to monitor and check products and rates in conjunction with the data obtained from Moneyfacts.
Rates are included only for those institutions which advertise a product closely fitting the definition used for each series, with the result that the banks and building societies in the sample and the percentage coverage may vary from month to month as institutions withdraw from and introduce products to the market.
An average rate is not published if there are fewer than three institutions in the sample, due to reasons of confidentiality and a concern that the average may not be particularly representative.
The weights used to produce the weighted average series are derived from the end month or average monthly balances, or new business volumes, reported by those institutions on Bank of England forms. These weights are then applied to the interest rates for individual banks and building societies.
DEFINITIONSGeneral
Rates are selected for inclusion according to certain criteria; some criteria are applicable to all series, whereas others are specific to the series in question. The generally applicable criteria include:
· Products must be widely accessible.
o Generally, those only available through intermediaries are excluded.
o Prior to January 2011, branch-based products were selected as far as possible, but from January 2011 coverage was expanded for most series to include products available only via the internet.
· Rates for borrowing from, and deposits with, a sample of banks and building societies are included; rates for business with other lenders and deposit takers are not.
· All rates are expressed gross of tax.
· All selected products are denominated in sterling.
· Fees are not included.
· Cash bonuses and cash-backs are not included.
· Prior to January 2011 bonus rates were not included, but from January 2011 guaranteed (unconditional) bonus rates are included for some deposit series.
Where more than one product fits the definition for any series, the rate selected is the most competitive and/or has the fewest conditions attached.
When a bank or building society no longer offers a product closely fitting the criteria they are excluded from the sample until a relevant product is reintroduced.
Secured loan (mortgage) rates
Rate definitions –The headline advertised rate is selected rather than the APR (Annual Percentage Rate).
No allowance is made for charges or cash-backs.
Although fees are not included in the rates selected, the effect of fees is taken into account in determining which mortgage rate to choose from the numerous products often available for each bank or building society. This is done by calculating the effective rate of mortgage repayments on a loan of £150,000 for the relevant fixation period including the product fee spread over the length of fix. The advertised rate for the most competitive product is selected for the quoted rate calculation.
Mortgage product definitions – Mortgage rates selected are those available to most borrowers and products restricted to first-time buyers, for example, are excluded.
Rates selected are generally those available on loans in the range of £25,000 to £500,000.
Loan-to-value ratio (LTV) measures the loan amount as a percentage of the property value; rates selected are the lowest available for loans of 75%, 90% and 95% LTV respectively.
Fixed term variable rate mortgages are those that either attract a short term (two year) discount relative to the institution's Standard Variable Rate (SVR), or add a premium to the Bank of England Bank Rate, or the lenders’ equivalent, for a short term. Lifetime tracker products (previously named Bank Rate tracker) are linked to the Bank of England Bank Rate or the lenders’ equivalent rate for their term.
Reasonable time margins are allowed for fixed maturity products. For example, mortgages with maturity between 21 and 27 months qualify as a two year loan. Products with redemption penalties at the end of the fixed maturity period are excluded.
Weights are derived from the gross monthly mortgage advances reported on Form ER as follows:
· The 2, 3 and 5 year fixed rate mortgages are weighted using new business gross advances for products fixed for 1-5 years.
· 10 year fixed rate mortgages are weighted using new business gross advances for products fixed for between 5 and 10 years.
· Variable rate mortgages are weighted using new business gross advances for floating rate mortgages.
Unsecured loan rates
The overdraft rates selected are those applicable for authorised overdrafts and are expressed in terms of EAR (Effective Annual Rate). Banks and building societies that charge a fee as opposed to a rate are excluded from the sample temporarily until a relevant rate is reintroduced. The overdraft rate series is weighted by monthly average outstanding overdraft balances reported on Form ER.
Two series are published for personal loan rates: for amounts of £5K and £10K. The rates are expressed in terms of APR, and no allowance is made for redemption penalties. From January 2009 the rates are weighted by the monthly gross personal loan advances on loans fixed for 1 to 5 years that are reported on Form ER.
Credit card rates are expressed in terms of APR and apply to standard credit card purchases. If an institution offers more than one card, preference is given to the one deemed to be the most widely available. The credit card rate series is weighted by monthly gross credit card advances reported on Form IC – Further analysis of credit card lending.
Deposit ratesPrior to January 2011 all deposit series were compiled using branch-based rates only, with the result that rates available only via the internet were not included. Similarly, guaranteed (unconditional) bonus rates were not included.
In order to maintain the relevance of the series, the ISA, Instant Access and Other Time series compiled on this basis will be discontinued after December 2012 and replaced with ISA and Instant Access series including internet-only rates and guaranteed bonus rates. These new series are calculated from January 2011.
Accounts with conditional bonuses are excluded for all deposit rate series, for example, where the payout of the bonus is contingent upon a restricted number of withdrawals.
Moneyfacts publish interest rates calculated on both a monthly and annual basis and rates calculated on a monthly basis are included where possible except in the case of fixed rate bonds and Cash ISAs where annual rates are used.
Rates on instant access savings accounts are selected for £1,000 balances and then weighted using average sight deposit balances reported on Form ER.
Series for branch-based rates excluding products available only via the internet, and excluding all bonuses are available for periods from 1995, and will be discontinued after December 2012.
Two new series for rates including internet-only accounts are available from January 2011, one including and one excluding guaranteed bonuses. These new series were first published in November 2012.
Rates on cash individual savings accounts (ISAs) are selected for the ISA allowance at the time and then weighted using by the stock of average daily cash ISA deposit balances reported on Form ER.
Series for branch-based ISA rates excluding products available only via the internet, and excluding all bonuses are available for periods from 1999, and will be discontinued after December 2012. Unlike the other ISA series, this series is weighted using balances on Form BT.
Two new series for variable rate cash ISA rates including internet-only accounts are available from January 2011, one including and one excluding guaranteed bonuses. A new series for 1-year fixed rate cash ISA is also now available. These new series were first published in November 2012.
Rates selected for 1 year fixed rate bonds have a fixed initial maturity of between 12 and 17 months. Similarly, rates selected for 2 year fixed rate bonds have a fixed original maturity of between 18 and 29 months. This series, introduced in November 2012, will have data back to January 2012. Rates are selected for £5,000 balances. Interest is calculated annually. Rates are weighted using gross new fixed rate bond balances reported on Form ER from January 2011.
The branch-based other time deposit series includes rates for notice accounts. Rates are selected for £10,000 balances in accounts requiring between 30 and 90 days' notice to withdraw without penalty. These rates are weighted using gross new time deposit balances reported on Form ER. This series began in 1995, and will be discontinued after December 2012.
REVISIONS
Quoted rates are published twice during the month: provisional data for the latest month on the 7th working day of the following month, and final data on the 21st working day. Rates published on the 7th working day are provisional as they are weighted using the previous month's balances or new business amounts, plus they may not include all rate changes that occurred up to the end of the month. Final data consist of end month rates weighted using weights updated to the same month as the rates. The provisional rates are therefore often revised when published on the 21st working day. The data published on the 21st working day represent end month quoted rates.
Data can also be revised as a result of the receipt of additional information or corrections to or refinements of existing data. In practice, such data revisions rarely occur beyond two years. Significant revisions to back data will be footnoted in the month in which the change occurs.
Most of the quoted rates series were started from January 1995 at which point separate series were published for banks and building societies, with weights derived from balance sheet returns for banks, and from FSA data for building societies.
The following major changes were implemented in January 2008 when the current methodology was introduced:
· The sources for weighting data were changed.
· The sample was updated.
· The combined bank and building society series were made available back to January 2005.
· The number of series published was reduced.
· The separate bank and building society series and some combined bank and building society series were discontinued from December 2007.
In January 2011, as a result of the optimisation of the effective rates sample (Form ER), the quoted rates sample was updated. The only series showing an effect greater than 0.1pp at the time was IUMBX67, where the effect was -0.20pp.
In November 2012, changes were made to some quoted rate series: several new deposit series were introduced and some were discontinued, weights were improved and certain criteria were changed to reflect changing market trends.
The largest revisions to existing series were to both personal loans series, the resulting revisions greater than 0.1pp were as follows:
|
|
Effect on IUMBX67 |
|
|
Effect on IUMHPTL |
2009 |
Jan |
0.38 |
2009 |
Mar |
0.20 |
|
Feb |
0.31 |
|
Apr |
0.26 |
|
Mar |
0.36 |
|
May |
0.18 |
|
Apr |
0.44 |
|
Jun |
-0.45 |
|
May |
0.40 |
|
Jul |
-0.55 |
|
Jun |
0.20 |
|
Aug |
-0.24 |
|
Jul |
-0.61 |
|
Oct |
-0.27 |
|
Aug |
-0.51 |
|
Nov |
-0.31 |
|
Sep |
-0.60 |
|
Dec |
-0.43 |
|
Oct |
-0.46 |
2010 |
Jan |
-1.04 |
|
Nov |
-0.45 |
|
Feb |
-1.11 |
|
Dec |
-0.64 |
|
Mar |
-1.08 |
2010 |
Jan |
-1.32 |
|
Apr |
-1.00 |
|
Feb |
-1.34 |
|
May |
-1.08 |
|
Mar |
-1.23 |
|
Jun |
-1.00 |
|
Apr |
-1.07 |
|
Jul |
-0.97 |
|
May |
-1.08 |
|
Aug |
-1.10 |
|
Jun |
-1.08 |
|
Sep |
-0.88 |
|
Jul |
-1.37 |
|
Oct |
-0.90 |
|
Aug |
-1.48 |
|
Nov |
-0.88 |
|
Sep |
-1.05 |
|
Dec |
-1.69 |
|
Oct |
-1.41 |
2011 |
Jan |
-0.81 |
|
Nov |
-1.44 |
|
Feb |
-0.70 |
|
Dec |
-1.70 |
|
Mar |
-0.74 |
2011 |
Jan |
-1.60 |
|
Apr |
-0.88 |
|
Feb |
-1.40 |
|
May |
-0.19 |
|
Mar |
-1.32 |
|
Jun |
-0.33 |
|
Apr |
-2.83 |
|
Jul |
-0.37 |
|
May |
-2.16 |
|
Aug |
-0.47 |
|
Jun |
-2.22 |
|
Sep |
-0.18 |
|
Jul |
-2.08 |
|
Oct |
-0.16 |
|
Aug |
-2.08 |
|
Nov |
-0.14 |
|
Sep |
-2.21 |
|
Dec |
-0.21 |
|
Oct |
-2.02 |
2012 |
Jan |
-0.18 |
|
Nov |
-1.94 |
|
Feb |
-0.54 |
|
Dec |
-2.07 |
|
Mar |
-0.72 |
2012 |
Jan |
-2.18 |
|
Apr |
-0.80 |
|
Feb |
-2.78 |
|
May |
-0.65 |
|
Mar |
-2.69 |
|
Jun |
-0.69 |
|
Apr |
-2.71 |
|
Jul |
-0.46 |
|
May |
-2.34 |
|
Aug |
-0.42 |
|
Jun |
-2.51 |
|
|
|
|
Jul |
-2.52 |
|
|
|
|
Aug |
-2.52 |
|
|
|
|
Sep |
-2.69 |
|
|
|
|
Oct |
-2.48 |
|
|
|
As a result of improved weights and changing criteria to the 1 year fixed rate bond series, the following revisions were also published in November 2012.
|
|
Effect on IUMWTFA |
2011 |
Jul |
0.11 |
2012 |
Mar |
-0.11 |
|
Jun |
0.12 |
Any structural change to back data in the quoted rate series will be footnoted in the month when the change occurs. Because of the nature of these products, banks move into and out of the sample as products change. Significant changes that are the result of this will also be footnoted.
All significant methodological changes will be detailed in a footnote published in the month when the change occurs.
FURTHER INFORMATIONRelevant material published:
Forthcoming improvements to interest rate statistics by Anisha Tibrewal & Jason Murphy Monetary and Financial Statistics (Bankstats) September 2012
Developments in effective and quoted rates statistics by Kiman Bassi, Monetary and Financial Statistics (Bankstats) March 2011
http://www.bankofengland.co.uk/statistics/ms/articles/art3mar11.pdf