Forthcoming improvements to interest rate statistics - Bankstats article

As part of the regular reviews of statistical returns, the Bank has reviewed both the effective and quoted rates datasets and will publish new series from both collections. These new series will be available from the September 2016 edition of Bankstats (Monetary and Financial Statistics), published on October 31st.
Published on 29 September 2016

Bankstats article

By Barney Greenish and Becky Sanders

 

Introduction

The Bank of England collects and maintains two interest rate datasets: effective rates (ER) and quoted rates (QR). Effective rates data are sourced from the Bank's effective interest rates return, Form ER, completed by 19 monetary financial institutions (MFIs).

Quoted interest rates are advertised rates offered to individuals on a range of secured lending, consumer credit and deposit products. Aggregate rates are compiled by collecting the headline rates advertised by MFIs in the ER sample and weighting these by balances reported on Bank of England returns to calculate weighted average rates for each product.

The Bank currently publishes effective rates series in Bankstats Table G1.4 and a quarterly distribution of balances, by interest rate type and tenure, from Form ER in Table G1.5. Quoted rates series are published in Table G1.3. Series from both datasets are also published on the Bank’s Statistical Interactive Database (IADB). For more information on the collections please see the explanatory notes.

Following regular reviews of both datasets, this article outlines new series to be published from September 2016 data. Annex 1 and Annex 2 provide IADB codes for the new effective rates and quarterly distribution of balance series, respectively. Annex 3 provides IADB codes for new quoted rates series and Annex 4 shows minimum, maximum and average revisions to quoted rates series as a result of improved weighting with the new ER balances.

Publication of new Effective Rates series

A review of Form ER was conducted as part of the rolling programme of reviews of statistical returns outlined in the Bank’s Statistical Code of Practice. The Bank started to collect new data from January 2016 and some new series were published in the January edition of Bankstats.

With effect from the September edition of Bankstats the remaining new series will be published. These include a breakdown of the household sector into unincorporated businesses (UB) and individuals & individual trusts (IIT), with further breakdowns for individuals’ mortgages, fixed-rate bonds, new business ISAs, credit cards and overdrafts. New series relating to lending to small & medium enterprises (SMEs) will also be published. These series will be available backdated to January 2016.

Further detail on new published series

Unincorporated businesses

New series will be published for a range of lending and deposit rates for unincorporated businesses to show rates available to these smaller businesses. These will be available on the IADB.

Individuals and individual trusts

Deposits

To allow for further analysis on deposits, new series for individuals will be published, including a new business ISA series, a current account series and rates on fixed-rate bonds broken down by fixation period.

Chart A shows the existing interest bearing sight series alongside the new current account series. The higher rate for current accounts reflects the competition in this market. Chart B shows new business fixed-rate bond series by fixation period, and ISAs.

Consumer credit

Given significant growth in the consumer credit market, new series relating to consumer credit will be published. Existing credit card series will be broken down by use of the card, with new series relating to balance transfers, purchases and cash withdrawals. These series will allow for more analysis on rates on these card types, which have seen growth in recent years.6 An additional series for interest and fee-charging overdrafts will also be published, reflecting the different pricing structures in this market. Chart C shows these series alongside existing credit card series.

Corporate lending

New series relating to lending to SMEs will be published, with floating loans broken down by reference rate and reset period and fixed-rate loans broken down by fixation period. This will allow for more detailed analysis on lending to these businesses by product type. Effective rates on outstanding and new business floating loan series are shown in Chart D and Chart E.

Quarterly distribution of balances

The effective rates data can be broken down to show the share of MFI business by different loan and deposit types, and fixation periods or maturities, for households, individuals and private non-financial corporations (PNFCs). These data are published quarterly in Bankstats Table G1.5.
New series showing the distribution of balances by loans and deposit type relating to individuals and SMEs will be published. IADB codes for these series can be found in Annex 2.

Publication of new quoted rates series

Mortgages

Two new mortgage series will be published: a two-year fixed 60% loan-to-value (LTV) series and a two-year fixed 85% LTV series. These series will be available backdated to January 2012.

Chart F shows the existing quoted rates on two-year fixed-rate mortgages with the new series for 60% and 85% LTVs in the blue and pink lines respectively. Many mortgage products, which are not currently captured in any of our higher LTV series, have a maximum LTV of 60%, and the 85% LTV series bridges the gap between the current two-year fixed 75% LTV and 90% LTV series.

New buy-to-let mortgage series

Given increasing interest in the buy-to-let (BTL) market, the Bank has compiled a new BTL mortgage series, for two-year fixed 75% LTV borrowers, backdated to January 2012.

Chart G shows the new quoted BTL series in the pink line compared with the current owner occupied two-year fixed 75% LTV mortgages in blue.
This new series is weighted using Mortgage Lenders and Administrators Return (MLAR) data, which are published quarterly.8 Quoted rates BTL data are therefore provisional until MLAR data for the relevant quarter are available to update the weights.

New ISA series

A new two-year fixed-rate ISA series will be published. This series will be available backdated to January 2012. Rates are currently published for variable and one-year fixed-rate ISAs. Due to increased deposits being placed in ISA products, the Bank will start to publish rates for the two-year fixation period.9 Chart H shows the current series in grey lines, with the new two-year series in the pink line.

Publication of 3 year fixed-rate bonds series

The three-year fixed-rate bond series has previously been available in the ‘Additional Statistics Requested by Users’. The Bank will now publish this series as a part of the regular monthly quoted rates dataset. These data will be available backdated to July 2011.

Inclusion of intermediary products

Since the last review of the quoted rates series in 2012, intermediaries have become an increasingly significant channel for mortgage products. Given this, intermediary-only products will now be eligible for selection across all mortgage series from September 2016 data. For further information see the quoted rates explanatory notes.

Improved weighting of existing quoted rates series using new effective rates data

More granular data on mortgages and deposit products will allow for improvements to quoted rates for these products, as the effective rates balances they are weighted on will be more closely aligned to the product selected. These improvements will be implemented when the new effective rates data are published in the September edition of Bankstats.

An initial assessment shows there are some series that will be impacted by these new weights. The impact as currently assessed can be found in Annex 4, where minimum, maximum and average monthly revisions due to these improvements are given for each impacted series. The largest impacts affect the Lifetime Tracker series, with an average absolute revision of 18bps. Any impacts that breach our thresholds will be footnoted on the relevant series in Bankstats Table G1.3. For more detailed information on weighting of quoted rates series, please see the explanatory notes. There are no other changes to existing quoted rates series.

To view all related charts and Annexes, please download the full article:

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For questions relating to this article please contact dsd_ir@bankofengland.co.uk  or call +44 (0)20 3461 3957.

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