Customers should not be in the dark

Click to follow
Indy Lifestyle Online
It has been a good week for savers, with Northern Rock bowing to the storm of protest it created last month by merging a number of savings accounts, cutting the rate of interest on most of them and penalising savers who wanted to switch as soon as possible to something more profitable.

Northern Rock has now agreed to give savers with notice accounts as much notice of a cut in rates as it requires them to give before they can withdraw money without loss of interest. Of course when rates are rising savers with notice accounts will still expect to get their rates increased at once, or they will give immediate notice of their intention to move their money.

Thanks to its quick response Northern Rock is no longer the immediate target of the OFT enquiry set up last week but the OFT is committed to ensuring that customers are fairly treated and there is certainly more that needs to be done. Many savers are still unaware when their accounts have become uncompetitive or when new and more attractive accounts become available, or when long-term interest rates are falling and instant access rates are as good as notice accounts.

Northern Rock has already pointed out that it would be an extremely expensive proposition to write to every one of their investors every time a new rate or a new account was introduced, giving them all the information and the opportunity to reshuffle their investments. But Bank of Scotland's Banking Direct arm had the right idea this week, linking the interest on its instant access savings account for amounts over pounds 5,000 to 0.25 per cent below the current Bank of Scotland base rate. That at least is a more reliable indicator than on the vast majority of savings accounts, but why only for investors over pounds 5,000 I wonder?

There is also no doubt that for the past three years in a desperate attempt to pinch mortgage business banks and building societies alike have been giving special mortgage deals and discounts to new customers (including special offers to tempt home-owners to remortgage without moving house) which were not available to their own existing customers.

Some mutuals, such as Nationwide and Britannia building societies, have since introduced loyalty bonuses for existing customers and discounts for those who keep the same lender when they move house, but the best remortgage deals are still available only for borrowers who switch lenders. Lenders justify unfairness in the name of competition. I wonder if the OFT will tackle that issue.

Comments