Savers still waiting for interest rate rise news
Last Thursday, the Bank of England announced the Base Rate would double from the historic low of 0.25% to 0.5%.
At the time, the governor, Mark Carney, said he expected banks and building societies to pass on the full rise to consumers, in the same way they were quick to pass on the rate cuts seen last year.
A week on, only a small number of providers have confirmed they’ll pass on the full rate rise to customers in the form of higher rates on savings products, according to data site Savings Champion. Many will only be passing this on from 1 December.
It praised Coventry Building Society for being swift in its response to raise rates, despite many of the savings products already paying competitive returns.
However, some savers could still be worse off in an environment which should dictate rising returns.
For instance, some Virgin Money savers actually saw their rates cut on the same day of the Bank of England rate rise decision.
The provider trimmed rates on its notice accounts – Rainy Day Saver from 0.90% to 0.75%, its Access 120 product from 0.95% to 0.75% and its ISA Saver from 1.05% to 0.75%.
This was simple bad timing, as Virgin Money confirmed these are all 120 day notice accounts so customers were informed of the rate change in August.
Further, data from Savings Champion also shows that Virgin Money slashed rates on 11 easy access ISA savings products – both for open and closed accounts – on 30 October despite deepening market speculation over a November rate rise. It sliced 0.55% from its Defined Access E-ISA issue 6 product and 0.54% from its Defined Access E-ISA issue 7 and issue 9.
These cuts – greater than the 0.25% Base Rate rise – means that these customers could lose out on any chance of regaining lost ground as Virgin Money said it’s “currently reviewing rates” for its current account and notice account offering.
It has confirmed it plans to pass on the full 0.25% increase to customers “who are at the start of their savings journey”, including on Help to Buy ISA, Saving to Buy E savers and all children’s accounts. Savings tracker products will increase by the full 0.25% from 1 December however and it added that it “continues to review our pricing to ensure our products remain good value versus comparable products in the market.”
Similarly, Yorkshire Bank/Clydesdale Bank cut the rate on the popular and market-leading Cash ISA – 40 Day Notice accounts by 0.50% following the base rate cut in August 2016. But in March 2017, it then ‘simplified’ and transferred all customers into the Cash ISA – Instant Access account, which means that some savers have seen a drop of up to 1.25% in the interest they are earning. Yorkshire Bank/Clydesdale Bank are yet to confirm what they plan to do with their variable rates.
Anna Bowes, director of Savings Champion, said we’ll still have to wait and see whether the best buy rates will continue in the upward direction that they’ve been on all year – or whether they have already peaked.
“Of course, for savers who are currently languishing in a poor paying variable rate savings account, you don’t need to wait and see what your current provider will do – simply add 0.25% to the rate you are currently earning and see if you can do better,” she said.