Banks deal a new blow to savers and homeowners
THE DAYS of near-zero interest rates are drawing to a close as the Bank of England drives up borrowing costs. But that still does not mean savers will get a better deal. The BOE hiked rates for the third month in a row to 0.75 per cent on Thursday, but the big banks are refusing to raise their savings rates. Yet they were quick to charge borrowers more, with many banks instantly hiking mortgage rates, as well as credit card and personal loan APRS.
It adds up to yet more bad financial news for Britons, where even good news comes with a sting in the tail these days. Positive wage growth of 3.8 per cent in the three months to January was overshadowed by BOE predictions that inflation will hit
8 per cent this year, making workers poorer in real terms.
The country is under the cosh, said Steven Cameron, pensions director at insurer Aegon: “Higher borrowing costs, a 1.25 per cent increase in National Insurance and frozen income tax thresholds present a triple whammy to April pay packets.”
SAVINGS SCANDAL
Savers have been furious with the big banks since the financial crisis began, and have scant reason to feel positive about them today.anna Bowes, co-founder of savings tracking service Savingschampion.co.uk said: “Halifax, Lloyds, Natwest, Bank of Scotland and Santander are still paying 0.01 per cent on easy access accounts.”
So far, fewer than one in 40 accounts have matched base rate increases and banks are getting worse rather than better. She said: “The last time the base rate was at 0.75 per cent, in March 2020, easy access accounts paid up to 1.60 per cent. Today, Cynergy Bank’s best buy rate is roughly half that at 0.84 per cent.”
Unless savers move their money from banks who refuse to play fair, the situation won’t improve. “Hoarding cash in accounts paying 0.01 per cent is playing into the hands of unscrupulous banks,” said Bowes.
MORTGAGE SHOCK
By contrast, Lloyds and Santander were swift to hike mortgage rates, and plenty more banks will follow, costing homeowners dear.
The average mortgage holder will pay almost £1,000 a year more following these base rate hikes, says online mortgage broker Trussle, with further increases to come.
Head of mortgage operations Amanda Aumonier said remortgaging can save homeowners £3,900 a year on average, and taking out a five-year fix today may be a wise move as this will protect against further rate hikes.
The days of the sub-1 per cent mortgage have been consigned to the history books but there are still cheap deals out there. She said: “Today’s best five-year fix at 80 per cent loan-to-value is currently 1.72 per cent with Natwest.this falls to 1.32 per cent with Barclays if homeowners have an LTV of just 60 per cent.”
Some borrowers will face early redemption charges on their existing deal, but Aumonier added: “You can usually remortgage a full six months before your deal finishes, so take advantage of today’s deals sooner rather than later.”
Suggestions that higher mortgage rates could trigger a property market crash seem unlikely, due to the housing shortage, although house price growth is likely to slow from last year’s breakneck 10 per cent.
LEAN TIMES
Higher borrowing costs will put further pressure on the growing number of Britons who are forced into debt by the cost-of-living crisis.
The average credit card APR has now jumped to a staggering 26.3 per cent, both for new and existing customers, according to Moneyfacts.
Personal loan rates are fixed for the term of the loan, but new borrowers will now pay more. Overdraft rates tend to be divorced from base rate but given that banks typically charge 39.9 per cent that is hardly a comfort.
However there are some good guys. Yorkshire Building Society will hike savings rates by at least 0.25 per cent, so all easy accounts pay a minimum
0.85 per cent.
Skipton Building Society pledged that all its variable savings accounts will pay at least
0.50 per cent, and it also held its mortgage standard variable rates.
Despite this, the pressure on households is only comparable to the worst of the 1970s, with the energy price cap set to leap 54 per cent to £1,971 from April, said Victor Trokoudes, chief executive of investing app Plum: “Budgets will be stretched thinner than most working people have ever had to deal with.”
SILVER LINING?
There is one potential piece of good news.the BOE now reckons inflation could spike around October, and this could hand state pensioners a bumper pay rise.
Under the triple lock, pensioners could get an 8 per cent inflationary uplift in 2023, the highest state pension increase ever.that would compensate for axing the triple lock this year and boost the income of state pensioners for generations to come – but only if the Government gives the green light.
Having axed the triple lock once, it could do so again.that would put the tin lid on a year of financial misery, but fingers crossed the political price will be too high for Chancellor Rishi Sunak to consider it.
‘Hoarding cash in accounts paying 0.01 per cent is playing into the hands of unscrupulous banks’