Rates are up: don't get short-changed - Spend & Save - Money - The Independent

Rates are up: don't get short-changed

You should now be getting more for your savings, says Melanie Bien. But if your bank is dragging its feet, you can vote with them

The increase in interest rates last week will have cheered a minority of savers: these are the ones whose accounts promise that any rise in the Bank of England base rate will be passed on to them.

But for those who don't have such a guarantee, whether they benefit from a rate rise is rather hit and miss. It depends on the account provider. Some pass on the full amount but, confusingly, not every time there is an increase. And others pass on just a proportion of the base rate rise.

If your bank doesn't give you the full 0.25 per cent rise, consider moving to one that does. Otherwise, with further rate hikes expected this year, you could miss out on even more potential gains.

Within minutes of the Monetary Policy Committee's announcement, internet bank Egg said it would pass on the full 0.25 per cent to its Internet Savings customers, giving them a payable rate of 4.25 per cent gross. Of course, Egg has to do this as it guarantees to match the base rate until 31 December 2007. New customers also benefit from a 0.75 per cent six-month bonus when they open an account - giving a payable rate of 5 per cent gross for the first six months.

Tesco Personal Finance also announced, within minutes of the base rate rise, that savers would get the whole 0.25 per cent increase, giving a payable rate of 3.1 per cent gross on balances of £1. Abbey said it would pass on the full rise on "most" of its savings accounts from Monday for new business, and from June for existing customers.

And that was that. Other providers stayed silent, though most managed to hike their standard mortgage rates pretty quickly.

If you aren't earning the best interest on your savings that you could be (check our "best buy" tables on page 34), switch to a better account. And take a historical view: which providers have a track record for passing on the full rate rise soon after it happens, and which haven't? Otherwise, you could open an account with an attractive rate, only to discover months later that it no longer looks so good because you haven't benefited from any further rate increases.

The last time the base rate rose, by 0.25 per cent in February, several account providers didn't pass on the full amount. Alliance & Leicester raised the rate on many of its accounts by just 0.05 per cent, while Halifax raised the return on its mini cash individual savings account by 0.15 per cent. HSBC simply said it was freezing its savings rates until the next base rate movement, so we should see some action from the bank in the next few days. If not, savers should switch to another provider.

When choosing an account, be wary of gimmicks such as bonus introductory rates: these get the provider into the best buy tables but are withdrawn months after you sign up. For example, Birmingham Midshires is paying 4.55 per cent gross interest on its easy access Telephone Plus account. But this includes a 0.85 per cent bonus for a year, after which you end up with a much less attractive 3.7 per cent gross.

Also, watch out for deals that attach lots of conditions to withdrawals. The above account is limited to six a year. And a new account launched last week by Leeds & Holbeck may give customers unlimited access to their funds at any time without notice or loss of interest, but you have to withdraw a minimum of £1,000. You also need £5,000 to open this account, and must keep a balance of at least £5,000 at all times.

However, the rate is guaranteed at 5 per cent gross until 31 May 2005, after which time it will either match or better the Bank of England base rate until 31 May 2005.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Life and Style
tech
Arts and Entertainment
Robin Thicke's video for 'Blurred Lines' has been criticised for condoning rape
music
Voices
Yes supporters gather outside the Usher Hall, which is hosting a Night for Scotland in Edinburgh
voicesBen Judah: Is there a third option for England and Scotland that keeps everyone happy?
News
John Travolta is a qualified airline captain and employed the pilot with his company, Alto
people'I felt like that was the lowest I’d ever felt'
PROMOTED VIDEO
News
peopleThe report and photo dedicated to the actress’s decolletage has, unsurprisingly, provoked anger
News
A plane flies close to the eruption of the Icelandic volcano
newsAnd yes, it's quite something
Sport
Tito Vilanova passed away aged just 45
footballThe club's former manager died in April, less than a year after he stood down
Arts and Entertainment
Benedict Cumberbatch
artAnd it's even for a good cause
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
filmsDaniel Craig is believed to be donning skies as 007 for the first time
Life and Style
techCriminals are targeting an e-reader security flaw
Life and Style
tech... and together they're worth at least £100 million
Arts and Entertainment
Matt Damon as Jason Bourne in The Bourne Ultimatum (2007)
filmMatt Damon in talks to return
Arts and Entertainment
Evil eye: Douglas Adams in 'mad genius' pose
booksNew biography sheds light on comic genius of Douglas Adams
Arts and Entertainment
Fringe show: 'Cilla', with Sheridan Smith in the title role and Aneurin Barnard as her future husband Bobby Willis
tvEllen E Jones on ITV's 'Cilla'
News
newsBut just how much does a 122-carat coloured diamond go for these days?
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Sales Executive

    £20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

    Payroll & Accounts Assistant

    £20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...

    SQL Developer - Watford/NW London - £280 - £320 p/d - 6 months

    £280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Senior BA - Insurance **URGENT**

    £400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

    Day In a Page

    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    Exclusive extract from Janis Winehouse's poignant new memoir
    Is this the role to win Cumberbatch an Oscar?

    Is this the role to win Cumberbatch an Oscar?

    The Imitation Game, film review
    England and Roy Hodgson take a joint step towards redemption in Basel

    England and Hodgson take a joint step towards redemption

    Welbeck double puts England on the road to Euro 2016
    Relatives fight over Vivian Maier’s rare photos

    Relatives fight over Vivian Maier’s rare photos

    Pictures removed from public view as courts decide ownership
    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    Donatella Versace at New York Fashion Week