Savings rates cut and top deals pulled ahead of base rate vote
Last month the markets were pricing in an 85% chance of the base rate being hiked in May. But within a month, the markets had flipped as there was a nine in 10 chance that rates weren’t going to be increased. In the end, interest rates were held at 0.5%.
But providers had priced in a rate rise and in a bid to limit interest on savings accounts, many chose to cut their products instead.
Research by data site Moneyfacts, revealed that the following changes have been made to savings accounts:
Rachel Springall, finance expert at Moneyfacts, 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.”
Its data from October 2017 – a month before the Bank of England rose the base rate by 0.25% – saw several savings providers cut their rates. This included Halifax, which cut its 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 it is keen to attract new money,” she said.
Springall added: “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.”