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Impact of methodological changes on existing series
The interest rates on the majority of pre-existing products are little changed, despite some significant changes to the calculation approach. Differences between the new and old interest rates are caused by an expansion of the sample to include smaller lenders and deposit takers, changes in the way firms’ rates are weighted together required by this expansion, and changes in the selection criteria for products. Charts 3 and 4 show that the scale of these differences has been broadly similar over the months for which the two versions of the data have been calculated. The impact of each change on previously published series are shown in Annex 1.
The changes led to increases in 12 of the 26 quoted rates series (by up to 0.81 percentage points) and decreases in 13 (by up to 1.24 percentage points), with the interest rate on one product unchanged. The average absolute revision was 0.16 percentage points. Mortgage rates were on average unchanged, but for consumer credit products the average change in interest rate was -17 basis points. The largest change was to the interest rate for overdrafts, which is now 124 basis points lower, reflecting changes to the products selected from individual lenders for inclusion in the series. The largest increase was for the credit card series, which is 81 basis points higher, reflecting the exclusion of ‘low rate’ cards that had previously been incorporated in the series.
For mortgages, weighting changes had the largest impact. Mortgages are now weighted using Product Sales Data – an FCA loan level collection – so the lending flows used are based on the same products as rates are selected for. The expansion of the sample also had a significant impact, reflecting the incorporation of new banks with higher average interest rates than those previously captured.
For consumer credit, most of the impact to series came from changes in product selection. For example, the exclusion of ‘low rate’ cards from the ‘representative’ series shifted it up by 61 basis points.
The impacts of changes to deposit series were mixed. The largest shifts were to instant access accounts, which were shifted up 12 basis points due to a change in product selection, and the 2 year fixed-rate ISA which was shifted down by 22 basis points due to changes in weighting approach.