Banks guilty of harshest cuts to saving deals

SAVeRS are being treated more kindly by building societies than banks as providers slash rates.

There is growing evidence that some banks are using this month’s 0.25 pc cut in the official interest rate to make even more money out of savers by reducing returns by a larger margin.

however, the big building societies at least are mainly limiting falls to the amount of the cut and even where they have cut by more, they still pay their loyal savers more than banks do.

So far some of the banks have announced new rates reduced by more than the 0.25pc cut in the Bank of england base rate earlier this month.

Kevin Mountford, head of banking at comparison site MoneySupermarket, says: ‘Banks are widening their margins and some will make a lot of money from this base rate change. So-called new challenger banks are joining in, too.’

Banks can increase their margins — the difference between how much they take in interest from borrowers and pay to savers — by delaying passing on a mortgage rate cut or dishing out bigger cuts to savers.

Sue hannums, from website Savings Champion, says: ‘Some providers appear to be taking full advantage of the cut in the base rate to reduce savings rates by more than the 0.25 pc cut.’

hSBC, along with smaller players First Direct, M&S Bank and Tesco Bank, have all announced savings cuts of 0.35 or 0.4 percentage points.

hSBC Loyalty Cash Isa goes down to as little as 0.7 pc at the end of this month, while First Direct Bonus Savings Account will fall from 0.75 pc to 0.4 pc.

Tesco Bank easy-access rates drop by 0.35 points to 0.4 pc from November.

The other big banks, including NatWest, Lloyds, halifax and Barclays, are keeping their cards close to their chests as to what they will do with their variable rate accounts, but some already pay as little as 0.25pc, so rates could fall to almost zero.

Among the building societies which have announced new rates, Nationwide BS pays 0.75 pc to new cash Isa savers and Coventry BS pays 1.1pc, having reduced their rates by 0.25 percentage points and 0.2 points respectively.

This compares with 0.4 pc at halifax and Lloyds and that is before any rate cut that could be in the pipeline. NatWest pays just 0.25pc.

halifax and Lloyds pay less to loyal savers who have been with them for a year or more, while building societies take a different tack.

For example, Nationwide, which cut its rates last Friday, pays as much as 0.95 pc to loyal customers on its easyaccess account.

That is nearly four times higher than the 0.25pc paid by halifax, Lloyds and Barclays. Some loyal savers in old accounts with halifax and Lloyds are earning only 0.1 pc. With hSBC, it is just 0.05pc. Yorkshire BS easy-access Triple Access Issue 4 goes down from 1.1pc to 0.85pc from September 1, but those who have been with the society longer in older issues 1 to 3 of the account will earn a slightly higher rate of 0.95 pc. Coventry BS cut the rate on its closed Poppy Isa by 0.35pc, but it still pays 1.4 pc. Some smaller banks are meting out big cuts in their fixed-rate deals to new savers or are disappearing from the market completely. New banks generally have to pay over the odds to woo customers. They attract money to fuel their growth ambitions with top rates through their internet sites, but once they have the money they need, they cut rates. Charter Savings Bank, which has been a consistently good payer to date, closed all of its bonds to new savers earlier this month. Another top payer, the Frenchowned RCI Bank, has cut its rates by up to 0.4 points since the start of this month. Then it paid 1.9 pc for two years. Now new savers see 1.5 pc. It has cut its top easy access rate from 1.45 pc to 1.2 pc. Sy.morris@dailymail.co.uk