Slowcoach savings deals play catch-up
Sunday 13 August 2006
Clouds have gathered over savers all year. Many have seen their rates slashed even though the Bank of England base rate has been kept on hold until this month's surprise increase to 4.75 per cent.
Since 1 January, more than 40 financial institutions have cut rates at least once on their variable savings products - in some cases by as much as half a percentage point.
It's now been 10 days since the Bank of England announced its decision to nudge the base rate up by a quarter of a percentage point, and a glimmer of hope has emerged.
First off the mark was National Savings & Investments, which put the rate on its Direct Cash individual savings account (ISA) up to 5.3 per cent with immediate effect. Others to react immediately with a full quarter point included the Yorkshire Bank and the Halifax.
Savings account providers who waited until the week after the rate rise to pass it on included West Bromwich and Market Harborough building societies and Anglo Irish bank.
Many providers have been slow off the mark, says Andrew Hagger of financial analyst Moneyfacts. "As [of Thursday night], we [had] only seen around a quarter of the 100 onshore providers announce. But at least they have all passed on the full quarter point - this is perhaps a sign of the level of competitiveness in the savings market."
With 75 or so institutions yet to make their decision, he adds: "It would be nice to see a provider break the mould - give their customers that bit extra - and make their competitors sit up and notice."
Although the Post Office responded within a day of the Bank's announcement, it did so only to say that it plans to put up the rate on its Instant Saver account to 5 per cent (including a 12-month bonus). This won't take effect until 29 August - two weeks away.
Watch out, too, for those providers who have cut interest on savings accounts in recent months ahead of the base rate move. Even if they do notch up their rates by 0.25 percentage points now, their customers will only be back to where they started this year. Marks & Spencer Money may have upped the rate on its mini cash ISA immediately but it had lowered it in July.
Stuart Glendinning of the price comparison website moneysupermarket. com urges savers to view the base rate rise as a "call to action". "You don't have to put up with ... derisory rates on notice accounts when there are now easy access accounts paying better rates."
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