Savers left out in the cold after rate rise

Savers have called on banks to pass on higher interest rates to customers and boost their rainy-day funds.

Many are hoping that the rise in the Bank Rate will help them combat rising inflation, while borrowers face already-rising mortgage costs.

But banks have not signalled they will raise rates on their savings accounts immediately, although many have started to hike borrowing deals.

Retired journalist Chris Shepherd, from Farnham, Surrey, said he was cautiously optimistic the rate rise would mean a better deal for his cash savings.

“We need an environment where squirrelling away is encouraged so we can get back our savings ethic – too many people these days are living far beyond their means,” he said. “The increase is certainly good news for savers, as long as the banks pass on the rate rise to their customers.”

No savings account currently beats inflation, meaning households will be forced to risk their cash on the stock market or see their purchasing power reduced.

Easy-access deals offer an average interest rate of 0.19pc, according to financial analyst Moneyfacts. Based on a £50,000 deposit, this would earn just £95 over a year. However, a 5.1pc rate of inflation would reduce this sum’s purchasing power to £47,540 – a drop of £2,555, after interest is added.

Banks have faced criticism in the past for taking weeks or months to increase the interest rates on savings accounts following a Bank Rate rise. Some have even been caught lowering their offers in anticipation of higher rates.

“They cash in by putting up mortgages first, while savers are always an afterthought. I think it is quite naughty behaviour,” Mr Shepherd added.