UK Savers Left Underwhelmed by Base Interest Rate Rise

By: MoneyFacts

Despite the positive move for savers by the Bank of England to increase bank base rate this month, providers seem to have left savers underwhelmed by their unenthusiastic approach to passing on the rise.

There were, however, some encouraging changes during October, as moneyfacts.co.uk recorded 28 individual rate cuts compared to 150 rate rises (including ISAs), with some deals increasing by as much as 0.85%. This means that rises have now outweighed cuts for ten consecutive months. Nevertheless, inflation statistics released today show that the Consumer Price Index has remained at 3.0%. Therefore, savers’ cash is still being eaten away by inflation, as there is not one single standard savings account* that can beat or match 3.0%.

To make matters worse, variable rate savings accounts, which include easy access and notice accounts (excluding ISAs), have seen very little in the way of rate rises since the start of 2017.

Rachel Springall, Finance Expert at moneyfacts.co.uk, said:

“While we have nearly reached the halfway point of November, there are bound to be some savers who have yet to feel any effect of the Bank of England’s rate rise, whereas they will be feeling the full force of inflation eroding their cash.

“A rise of 0.25% isn’t too much to celebrate, considering the interest earned on £1,000 would be just £2.50 more. Savers need the banks to want their cash again and compete with decent returns after years of disappointment thanks to Government lending initiatives.

“Savers may not have noticed the disappearance of some Best Buy savings accounts, which have been entirely withdrawn from sale and are yet to return to the market. These include easy access accounts from Post Office Money, Ulster Bank and Virgin Money which were paying 1.27%, 1.25% and 1.21% respectively. In addition, some providers cut the rate on their easy access account before the announcement, with Halifax for instance dropping its rate from 0.25% to 0.05%.

“This all seems to indicate that a rate rise by the Bank of England isn’t being treated as much of a priority, especially when compared with a rate cut. In August 2016, we recorded over 300 savings rate cuts following the decision to drop the bank base rate to 0.25%. Today, almost halfway through the month, we have had just 49 rate rises since the start November, so many savers out there will see little difference until December at the earliest.

“Some of the biggest banks in the country have yet to announce whether they will be passing on the rise to their savers at all. While they drag their heels, it’s as good a time as any for savers to check out the Best Buys and consider switching to something more worthwhile.”

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