‘Disappointing news’ as many savers warned they may not benefit from rate rise
Banks have been accused of being quick to hike costs for borrowers but slow to raise interest rates for savers.
Savers have been warned they may not benefit from the interest rate rise after it was reported that only a fraction of providers have passed the increase on to all customers.
Banks have been accused of being quick to hike costs for borrowers while being slow to raise interest rates for customers to reflect the 0.25 percentage point rise announced by the Bank of England (BoE) more than a week ago.
Interest rates are now at 0.75%, the highest level since the financial crisis.
Savers should think about switching and not hold their breath for a rate rise on their account moneyfacts.co.uk
However only 10 of more than 100 providers in the savings market have so far announced how their products are changing as a result, according to moneyfacts.co.uk.
Some have passed on the full 0.25 percentage point increase, albeit after August 28, while some major lenders have either partially applied the rise or only applied it on a few account types.
Rachel Springall, a finance expert from the site, said it would be “disappointing news for many savers” that they may not benefit from the full rate rise.
“It is a real shame, and just demonstrates why savers should think about switching and not hold their breath for a rate rise on their account,” she said.
The interest rate rise came as a blow to millions of mortgage borrowers on variable rate deals, with a quarter-point rise adding around £16 a month and £190 a year to the average mortgage.
However, it offered some relief to savers who have seen their nest eggs decimated by above-target inflation and negligible returns.
Many home-owners are also locked in to fixed-rate mortgages, and so will not feel an immediate impact from the base rate rise.
And at 0.75%, rates are still very low by historical standards, given that the base rate stood at more than 5% when the credit crisis and subsequent global financial crisis hit.
The delay in benefits reaching savers, compared with the swift hikes in costs to borrowers, was criticised by the head of the influential Treasury Select Committee of MPs.
Chairwoman Nicky Morgan told the Times: “It’s no wonder that our banks have such a lot of work to do to rebuild trust among customers when they ignore the first opportunity to give a little something back to savers, while moving speedily to increase costs for borrowers.”