How banks WON’T pass on rate rise

ALL eyes will be on the Bank of England at noon tomorrow as it announces whether its base rate will go up from its historic 0.25 pc low to 0.5 pc.

If so, it will be the first rise for more than ten years, since July 2007. Savers might breathe a sigh of relief that the amount they earn on their savings pot will also start to rise — but you should not count on it.

You need to check your rate and search out a top-paying account to make the most of your money or you could be left languishing in a poor deal.

There’s no guarantee that rates on variable rate easy-access accounts will rise with the base rate, and the main victims could be those in old accounts.

Experts say the link between base rate and the rate you earn has been well and truly severed over the past few years.

Even where providers do pass on any increase to loyal savers, you are unlikely to benefit with traditional banks and building societies until the beginning of December; they often take a few weeks to react to base rate changes.

And rather than pass on any rise in full, they could just offer better deals to new savers. So far only Nationwide has promised to pass on any increase in full. Rachel Springall, finance expert at Moneyfacts, says: ‘Don’t expect any rise in base rate will be passed on in full on your account.

‘If traditional banks and building societies want to attract money, they are likely to launch new accounts rather than pay more to existing savers.’

Move away from big banks which already pay a pittance, since the differential between them and their competitors could get wider. Anna Bowes, director at Savings Champion, says: ‘ Even if the big banks pass on the whole rise, they will still be poor value as they have cut their rates to the bone.’

New banks have already pushed rates up to pay as much as 1.3 pc and further rises cannot be ruled out.

But among the big banks, NatWest Instant Saver and HSBC Flexible Saver both pay just 0.01 pc, or £1 interest a year on each £10,000. Even if they match any base rate rise in full, you will only earn 0.26 pc, or £26.

Barclays Everyday Saver could rise from 0.05 pc to just 0.3 pc, or £30 interest. Santander Everyday Saver pays 0.1 pc and could go up to 0.35 pc. If you switch to a top payer such as RCI Bank Freedom Savings Account, you’ll earn £130 at its current rate of 1.3 pc. It could go up to £155 if it raises its rate. Savers in closed accounts could see their rate rise by less than base rate or even see no rise at all. Lloyds and Halifax both move you to a closed easy-access account once you have been with them for a year. With Lloyds Easy Saver you are moved into its Standard Saver at 0.05 pc once your account has been open for 12 months. The bank also has other closed easyaccess accounts including the Internet Saver and Select Saver, both of which pay the same rate. With Halifax Everyday Saver you end up in its Instant Saver at 0.05 pc after a year.