THE GREAT SAVINGS RATE RIP-OFF
SAVERS are facing a five-year low in accounts paying above the Bank of England base rate.
This is despite the Bank recently hiking interest rates to 0.75 per cent.
It means millions of savers, who have suffered more than a decade of paltry returns while interest rates have been at record lows, are still waiting for a fair deal.
The scandal has sparked another round of rip-off claims aimed at banks and building societies who have been quick to increase mortgage payments.
Some 69 per cent of savings accounts pay a rate above 0.75 per cent, analysis by Moneyfacts.co.uk has found.
It puts the proportion of accounts paying above the base rate at its lowest level since January 2013 when it was 68 per cent.
The base rate was increased from 0.5 per cent in August, but consumer groups have accused providers of double
‘It’s vital savers look for other options to help money grow’
standards when passing on the rate change to savers and borrowers.
Charlotte Nelson, finance expert at Moneyfacts, said: “It is a sorry state of affairs that, despite two rate rises from the Bank of England, savers are still not seeing any real improvement in rates.
“In fact, the average easy access account has only risen by 0.04 per cent since August 2016 and more shockingly, the average easy-access Isa has fallen over the last two years by 0.08 per cent.”
The situation is unlikely to improve until all the funding from Government schemes – such as the Term Funding Scheme – disappears and bigger banks stop trading off their names and offer savers a decent return, added Ms Nelson.
However, savers continue to flock to easyaccess accounts, ploughing £18billion into them since the start of the year, figures from the Bank of England show.
Ms Nelson said: “With a substantial chunk of the easy-access market paying less than the base rate, it is likely a large proportion of this cash is sitting in poor-paying accounts.
“Now is not the time for savers to rest on their laurels. In order to achieve a decent return, they must work hard and actively shop around to maximise their interest.”
Samantha Seaton, chief executive of Moneyhub, said: “Many banks are too slow to pass on the benefit of a rate rise, so it’s vital savers actively look for other options to help their money grow.”
Consumer champion Which? found earlier this month that around two-thirds of instant access variable savings accounts had failed to see any benefit so far from the rate rise on August 2.
Meanwhile, almost half (48 per cent) of providers had raised their standard variable mortgage rates by the full 0.25 per cent.
Harry Rose, Which? money editor, said: “When news of the Bank’s 0.25 per cent base rate rise was announced last month, many savers will have assumed that things were finally looking up after more than a decade of ultra-low returns. But the banks had other ideas.
“In the month since, long-suffering savers have been left wondering if they’ll see any boost at all as numerous banks and building societies refused to pass on the increase.
“While half of mortgage providers swiftly hiked their rates by the full amount, the vast majority of savings rates stayed the same.
“While homeowners quickly faced higher bills, savers missed out. And this double standard is now par for the course. It was the same last year after the previous rate rise.
“In the worst cases, providers have readily hoisted mortgage rates by the full 0.25 per cent, but not passed on a single benefit to their savings customers.
“Banks and building societies have no good excuse for this behaviour.
“For a banking sector still struggling to regain trust after the financial crisis, we must see fairness for consumers.”
Kate Smith, of investment specialists Aegon, said: “It’s disappointing but not unexpected to see the banks’ reluctance to pass on the interest rate to savers, while at the same time increasing mortgage rates.
“These ‘double standards’ aren’t new but with the proportion of savings accounts on the market paying above the Bank of England base rate sinking to a five-year low, consumers are set to feel the effects on their savings in the long-run.
“Consumers should consider the full range of investment options available to them and weigh up whether or not they should move at least some funds out of cash savings accounts and into Isa stocks and shares.”
A spokeswoman for the lenders’ trade body UK Finance said: “Last month’s rate rise will impact businesses and consumers in different ways depending on the nature of the lending and savings products they hold.
“Banks have made it easier for customers to shop around to get the best deal for them, including clearer communications about the rates they receive, faster cash Isa transfers and stronger customer prompts before a rate is reduced.
“Any customers looking for a better rate should always shop around to look for the best deals on offer.”
THE banks are quick enough to put up their rates when it suits them but disgracefully slow to increase them for savers. For 10 years, since the banking crash and since interest rates dropped dramatically, savers have had a terrible deal.
The Bank of England finally raised the base rate last month from 0.5 per cent to 0.75 per cent but a new report finds that the proportion of savings accounts paying above the Bank’s base rate has sunk to a five-year low. Just over two-thirds of savings accounts pay above a miserly 0.75 per cent.
But at the same time almost half of mortgage providers lost no time in raising their standard variable rates by the full 0.25 per cent.
Since the crash the public has lost all faith in the ability of banks to behave honourably and is appalled at the way they have emerged unscathed, unsanctioned and unrepentant.
The pressure is on the banks to show that they get this and are willing to play fair with the public. Politicians are always urging us to be savers rather than borrowers but they show little inclination to help the public in doing that. Raising bank rates for savers promptly in response to the rise in the base rate should be a legal obligation.