Re­vealed: the banks that robbed savers of a rate rise

The Daily Telegraph - Your Money - - FRONT PAGE -

Six­teen banks and build­ing so­ci­eties cut re­turns on sav­ings ac­counts in the weeks be­fore Bank Rate rose, says Sam Mead­ows

Savers were hit by 50 rate de­creases in the month be­fore the Bank of Eng­land raised in­ter­est rates from 0.5pc to 0.75pc, their high­est level since 2009, on Aug 2. Al­though the de­ci­sion was widely ex­pected, 16 banks and build­ing so­ci­eties ac­tu­ally de­creased sav­ings rates in July and early Au­gust, Tele­graph Money can dis­close.

Bar­clays, the big­gest bank to do so, cut rates on seven ac­counts by 0.2 per­cent­age points on Aug 1 – just one day be­fore the rate in­crease.

An in­crease in Bank Rate is usu­ally re­flected quickly in vari­able-rate mort­gages – HSBC, Bar­clays and Vir­gin Money have al­ready in­creased rates for bor­row­ers in line with the cen­tral bank’s de­ci­sion – but savers are rarely given the same treat­ment. Most of the banks that have an­nounced an in­crease in sav­ings in­ter­est since Aug 2 have of­fered savers only 0.1 per­cent­age points more.

Bar­clays said the de­creases in early Au­gust were on fixed-rate ac­counts so would not im­me­di­ately af­fect ex­ist­ing savers. It claimed its rates re­mained com­pet­i­tive. The cuts took the rate on its one-year bond from 0.9pc to 0.7pc, on its two-year flex­i­ble cash Isa from 1.25pc to 1.05pc and on its three-year flex­i­ble bond from 1.6pc to 1.4pc.

York­shire Build­ing So­ci­ety cut rates on 11 ac­counts and Sains­bury’s Bank on nine. Oth­ers to lower rates in­cluded Skip­ton Build­ing So­ci­ety, Van­quis Bank, Chelsea Build­ing So­ci­ety and Bank of Cyprus UK.

Anna Bowes of Sav­ings Cham­pion, a sav­ings man­age­ment ser­vice, said: “It’s quite sus­pi­cious to see rates be­ing cut when there was such a strong like­li­hood Bank Rate was go­ing to be in­creased. Bank Rate is there for both bor­row­ers and savers. But the rates of in­ter­est on sav­ings ac­counts are so sev­ered from base rate – it’s ab­so­lutely out­ra­geous that banks and build­ing so­ci­eties have so lit­tle re­gard for it.”

Data from Sav­ings Cham­pion shows that sav­ings rates have not re­cov­ered to pre­vi­ous lev­els fol­low­ing past in­creases in Bank Rate.

In the two months be­fore Bank Rate was cut from 0.5pc to 0.25pc in Au­gust 2016, the av­er­age rate on an easy­ac­cess ac­count was 0.5pc. This quickly fell to 0.35pc but, de­spite two in­creases in Bank Rate since Novem­ber, has risen only to 0.41pc in re­cent months.

Si­mon Hills of UK Fi­nance, the bank­ing trade body, said main­tain­ing the right level of sav­ing de­posits was a balancing act and that in­ter­est rate changes of­fered a way to achieve it.

“There are a num­ber of other ways that banks can find fund­ing, from tak­ing de­posits from com­pa­nies or rais­ing funds in the in­ter­na­tional cap­i­tal mar­kets,” he said.

“If banks don’t need re­tail de­posits they won’t price up for them.

“It’s still quite a com­pet­i­tive mar­ket. We have a lot of ‘chal­lenger’ banks in­creas­ing com­pe­ti­tion and of­fer­ing very good rates to savers.”

A se­ries of gov­ern­ment fund­ing schemes has pro­vided cheap money to banks for the past five years, al­though they came to an end last year, and this has also re­duced the in­cen­tive for banks to of­fer de­cent sav­ings rates.

An­drew Gall, of the Build­ing So­ci­eties As­so­ci­a­tion, said mu­tu­als had gen­er­ally paid bet­ter rates than banks.

He said: “Providers must reg­u­larly re­view both mort­gage and sav­ings rates and ad­just them to chang­ing cir­cum­stances. This isn’t just be­cause of changes in the Bank Rate. For ex­am­ple, if other providers change their sav­ings rates, the rest may need to re­spond to en­sure they do not at­tract too lit­tle or too much new money.

“Even when these fac­tors don’t change, any bank or build­ing so­ci­ety that has re­ceived a high vol­ume of sav­ings into a high-pay­ing ac­count and sig­nif­i­cant out­flows from a low­er­pay­ing ac­count may need to ad­just some in­ter­est rates across its range to en­sure its com­mer­cial po­si­tion re­mains vi­able over­all.”

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