Just one in 10 banks passed on savings rates boost due to interest rate rise despite hiking mortgage rates
IF you are banking on an interest rate rise to boost your savings next month, you may need to think again.
The Bank of England has been tipped to raise interest rates when its monetary policy committee meets next week, but any rise may not bring any benefits for much maligned savers.
Consumer watchdog Which? has analysed how banks reacted to the previous interest rate rise in November – when rates were increased from 0.25 per cent to 0.5 per cent - and it is bad news for savers.
Rather than pass on the increase to savers, just one in 10 providers passed on the full rate rise to their customers across all their instant access accounts within five weeks of the change.
The Which? research looked at 327 variable instant access savings accounts and Isas as of December 11 2017.
It found that in the five weeks after the base rate rise, 48 per cent didn’t see any rate change at all, 30 per cent saw an increase of less than 0.25 percentage points, while one in five passed on the full change.
In a further blow to savers, Which? discovered that 13 of the best instant access accounts had actually been withdrawn and relaunched by eight providers with either a minuscule increase, no change, or in some cases even a decreased rate.
The analysis also identified double standards among banks and building societies as they happily hiked their mortgage rates in the aftermath of the previous rate rise, while some of the lowest priced deals were even withdrawn.
Gareth Shaw, a money expert from Which?, said: “The last base rate rise saw clear double standards from some financial institutions, hiking the bills of mortgage holders, while denying savers the full benefit and actually withdrawing some of the most competitive deals altogether.
“Ahead of a possible future rate rise, we’re calling on banks and providers to be fair to their customers across the board.”
What is the base rate?
SIMPLY put, it’s the country’s official borrowing rate, and is the rate the Bank of England lends to all the other banks in the UK
It is incredibly important as it a guide for lenders on what rates it can offer – and therefore impacts mortgage rates, credit cards, loans and savings.
It was stuck at record low levels for a decade because of the state of the economy after the financial crash in 2008.
It was raised back to 0.5 per cent last November, but after today’s decision by the Bank has seen markets pencilling in more than three hikes within three years., starting later in 2018
Rachel Springall, of comparison website Moneyfacts, warned that banks can be selective of which accounts benefit from interest rate rises.
She said: “When base rate previously rose, savers had to wait with bated breath to find out if they would benefit.
“Unfortunately, while plenty of rate rises had been announced within the space of a month, some savers would have found that they had not benefitted from the full rise. Savings providers appeared to have been very selective about which accounts get the full rise.
“As we come close to a possible rise in May, savers would be wise to keep on top of the best deals and not assume that their variable rate will have the full rise passed on.”
You don’t just have to wait for your bank to take action though.
Sarah Coles, personal finance analyst for Hargreaves Lansdown, says interest-starved savers should vote with their feet.
She said: “While the high street banks continue to disappoint, the most competitive rates have been rising gradually for over a year now, as the newer challenger banks compete for business.
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“The best results don’t come from hoping your bank will do the decent thing, but getting active with your savings, and moving your money somewhere more rewarding.”
“Unsurprisingly, the biggest high street banks are typically missing from the top deals in the savings market. Therefore, savers would be wise to consider the more unfamiliar brands instead to make their cash work harder.”
Saving rates have been dismal over the last 10 years as record-low interest rates have made it virtually impossible to find a decent home for your hard-earned cash.
So if you're looking to start putting some of your hard-earned cash away, where should you be looking?
The Sun Online took a look at the best-paying accounts on the market which will give you the most bang for your buck.
We've also looked at how to find the best mortgage deal for your first home.
Here's what you need to know about finding a first-time buyer mortgage.
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