Egg, the internet bank, heaped more misery on its customers this week, slashing the rates on its internet savings account by 0.5 per cent – twice the amount by which the Bank of England cut base rates.
The move came just two weeks after the bank announced that it was closing some 161,000 of its credit card accounts, claiming that it wanted to reduce the levels of risk on its balance sheet.
The Bank of England's Monetary Policy Committee voted to cut interest rates by 0.25 percentage points to 5.25 per cent earlier this month, prompting most banks and building societies to cut the rates on their savings accounts by a similar margin. Egg and Liverpool Victoria went one step further, cutting their rates by half a percentage point.
Adrian Russell, head of media relations at Egg, said that the larger cut had been made in response to "market conditions", adding that there was no link between the savings decision and credit card cutbacks.
"We believe these changes are fair," he said. "Egg has provided long-term value to savings customers. We're still in the top 30 savings accounts in the UK, and we do offer one clear and competitive rate for all customers. Our mini cash ISA is staying at 6.05 per cent, which is one of the top offers available."
Andrew Hagger, head of news at moneyfacts.co.uk, the comparison site, said Egg's internet savings rate was now a long way off the best accounts. "It was only a couple of weeks ago that 161,000 Egg credit-card customers received the unwelcome news that their facility to continue to spend on their card was going to be withdrawn in 35 days," he said.
"Now it's the turn of Egg savings customers to be the recipients of some less than joyful news.
"With the level of competition in the savings market extremely fierce at the moment, you can currently bag yourself 6 per cent or above on each of the top six best buy internet savings accounts, so, if you're not happy with the rate you're being offered, put your mouse to work and get yourself a better return on your savings," he said.
Average interest rates on savings accounts are now a whole percentage point higher than they were a year ago when the base rate was last at 5.25 per cent. The very best internet accounts, such as those offered by Abbey and Alliance & Leicester, are now paying 6.5 per cent.Reuse content