Banks Have Hit Savers' Interest Rates
The way the banks have held back on recent interest rate cuts with regard to mortgage rates has been highlighted, but the banks are raking it in on the other side of the coin as well.
Savers are being hit in a similar way to mortgage holders. Interest rates on savings accounts have been cut by as much as 0.6% since last August, yet in that time the Bank of England base rate has only gone down by 0.25% - in December.
The banks have made the changes through a series of small reductions designed to hide the full extent of the cuts to the unsuspecting customer. While taking full advantage of the December 0.25% rate cut, they have also cut the rate on several other occasions to create a much bigger cut in interest rates for savers.
Halifax, Lloyds TSB, NatWest, RBS, Abbey and Barclays were all cutting their rates even before the Bank's base rate cut, the worst coming from Lloyds TSB and Halifax.
The Lloyds TSB internet-base Online Saver had its rate cut by 0.6% between 2 August 2007 and 2 January 2008, and Halifax's Saver Reward's interest rate was cut by 0.59%. Some Abbey accounts have gone down by 0.5%; Barclays' biggest cut has been by 0.52% and RBS has made a big cut of 0.55%.
It's unlikely to be the end of it. Some 51 of 63 economists forecast that the base rate will be 5% or lower by the middle of this year, so savings rates will undoubtedly come down again.
Top rates on internet-based accounts can be as high as 4.8% (6% before tax), whereas the Lloyds TSB Online Saver now earns 3.44% (4.3%) if the account was opened before 26 March 2006. This amounts to £136 difference for every £10,000 saved for the basic taxpayer.
For those opening an account after that date the rate is higher at 3.92% (4.9%), because it includes a 0.6% pre-tax bonus payable in the first 12 months.
The Saver Reward branch-based account from Halifax pays a miserable 2.07% (2.47%) on £5,000 - and then only if you withdraw money less than four times a year. If you take out money more often than that the rate falls to 1.16% (1.51%). Halifax's Instant Saver account has a rate of 1.73% (2.22%) with unlimited withdrawals. This rate has been reduced by 0.54% in the period stated.
The Guaranteed Saver account pays a much better 4.4% (5.5%), but there is a limit of four withdrawals a year.
As a general rule for the big banks, the less you have in an account, then the more you will have suffered from the round of interest rate cuts.
Nationwide stands out from the banking crowd. Its interest rates have been cut by only 0.25% in the August to January period, exactly in line with the Bank of England base rate.
It seems just another way that the banks are trying to re-coup losses from their mistakes in sub-prime investments, so now we're all paying more for our mortgages and earning less from our savings, to enable the banks to boost their cash flow and profits.
Published on January 14, 2008
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