A week after the Bank of England raised its base rate by 0.25 of a percentage point, seven out of ten banks and building societies have still not told customers whether they will get more interest on their savings.
Rachel Springall, a finance expert at Moneyfacts, says: “Savers will be feeling a bit left out from the base-rate rise, with many seeing no difference until at least December on their variable accounts. Some of the biggest banks in the country have yet to confirm whether they will be supporting savers.”
On Thursday Lloyds Banking group, which announced rises in its variable-rate mortgages less than two hours after the Bank of England rate rise last week, said it would raise interest on its Lloyds and Halifax savings accounts by between 0.1 and 0.35 of a percentage point for existing customers, and between 0.15 and 0.5 of a percentage point for new customers.
Mark Carney, the governor of the Bank of England, says that he expects banks to raise returns for savers, yet it is the availability of cheap central funding that is enabling banks to hold off from passing on the interest rate rise.
Sarah Coles, a personal finance analyst at Hargreaves Lansdown, the wealth manager, says: “Given the backdrop of the cheap money available to the banks through quantitative easing and the Funding for Lending scheme, it’s not enormously surprising that some of the high street banks are dragging their feet.”
Clydesdale and Yorkshire Bank, West Bromwich Building Society, Buckinghamshire Building Society and Aldermore Bank raised interest on their base-rate tracker savings accounts immediately after the base-rate announcement.
Since then, holders of 12 savings accounts have enjoyed a rate boost, most by 0.25 of a percentage point, although holders of the Ikano Bank easy saver account received a paltry 0.05 of a percentage point more.
Meanwhile 17 banks and building societies have promised to raise the rates on their variable savings accounts next month, most by 0.25 per cent.
NS&I, the government-backed savings bank, announced this week that it will raise rates from December. The prize fund rate on Premium Bonds will increase to 1.4 per cent and the odds will improve from 30,000-1 to 24,500-1.
Ms Coles says: “In a normal market the banks would be fairly disgruntled that NS&I is offering competitive accounts, on the grounds that they don’t want to be competing with the government for business. However, in the current market this is far less of a concern for them, because they can go elsewhere for cash. I therefore wouldn’t expect the NS&I announcement to make an enormous difference to the high street banks’ strategy.
“This is still a tale of two savings markets: the high street banks aren’t particularly keen to encourage savers, while the challenger banks are competing hard for market share.”
Many high street banks, including HSBC, Barclays. Metro Bank, the Co-operative Bank and Bank of Scotland, have simply said that their savings accounts are “under review”. Santander has said that the majority of its savings accounts will rise by a quarter of a percentage point from December, while TSB and Tesco Bank offered savers increases of 0.15 of a percentage point.
By contrast, most mortgage providers have increased the rates on their standard variable rate or tracker loans, including HSBC, Barclays, Lloyds, TSB, Nationwide and Tesco Bank, many within 24 hours of the Bank of England announcement.
Ms Springall says: “Mortgage borrowers on a tracker rate will feel the impact of the rise fairly immediately, whereas many lenders appear to be waiting at least a month until they change their standard variable rate [SVR], which will give borrowers time to consider moving their deal. It’s going to be more likely that borrowers will save money by switching from an SVR to a fixed rate, but whether they can afford to move their deal is another matter altogether.”