UK Savings Shock as Rates Were cut Before Base Interest Rate Vote

By: MoneyFacts

Savers still deflated from last week’s base rate announcement will now have to stomach the fact that the savings market has undergone a bit of a stumble. As the market prepared itself for a base rate change, there were unforeseen savings rate cuts, with some deals disappearing altogether.

In fact, research from moneyfacts.co.uk, can reveal that, since the start of April, there have even been several rate cuts made to Best Buy deals. In addition, various deals were withdrawn entirely from the market in the run-up to the base rate announcement, which have yet to be replaced. Some accounts have seen their rates cut three times since the start of April*, a clear sign that providers had to adjust their exposed market position.

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

“Savers who held out on investing their cash into a top rate, having pinned their hopes on a base rate rise last week, will be feeling disappointed by the outcome. The decision to keep the base rate on hold was in complete contrast to a month ago, where a rise was tipped to be on the cards. Over this period, right under the noses of savers, some of the best deals on the market were pulled from sale or had their rate cut; providers themselves had priced in a rate rise and, not wanting to be forced to pay too much should they have to raise their own rates afterwards, they opted to cut their products instead.

“The savings market has faced these cuts and withdrawals since the start of April, as providers adjusted their Best Buy positions in the run-up to what was once thought of as rate rise certainty. It just goes to show that the market can react to the possibility of a base rate change way before an announcement comes around, and in fact, this is a bit like déjà vu.

“If we look back to October 2017, a month before the Bank of England rose base rate by 0.25%, we saw several savings providers cut their rates. This included Halifax, who cut their Everyday Saver from 0.25% to 0.05%, and then upped the rate in November 2017 – after the base rate rise – to just 0.15% for new customers.

“The flow of funds into some of the less familiar banks has also played its part over the last few weeks, with Charter Savings Bank, Ikano Bank, Masthaven Bank Ltd, Secure Trust Bank, United Trust Bank and Wyelands Bank cutting the rates on their one-year fixed bonds. In more positive news though, it’s not every brand making this move, as Paragon Bank recently opened its easy access account to new customers, showing that they are keen to attract new money.

“It may be prudent for savers to focus their attention on the top deals right now, and not resign themselves to waiting for a base rate rise to come along. This way, they can be in the right frame of mind to avoid missing out on the best rates available.”

*Tesco Bank easy access saver was cut three times between 6th April and 3rd May. Ikano Bank 1 year fixed bond cut twice between 12 April and 3 May. Selection of cuts and withdrawals appeared between 1 April and 9 May 2018.

moneyfacts.co.uk is a financial product price comparison site, launched in 2000, which helps consumers compare thousands of financial products, including credit cards, savings, mortgages and many more. Unlike other comparison sites, there is no commercial influence on the way moneyfacts.co.uk ranks products, showing consumers a true picture of the best products based on the criteria they select. The site also provides informative guides and covers the latest consumer finance news, as well as offering a weekly newsletter.

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