Top of the chops: Which banks are making bigger rate cuts than the Bank of England?
Eleven banks and building societies have slashed rates on one-year savings accounts by more than the Bank of England’s recent base rate cut, according to analysis by Moneywise.
In total, 30 banks and building societies covered by the Financial Services Compensation Scheme (FSCS) now pay less than they did three months ago – and of these, 11 have cut rates by more than 0.25% (base rate), according to data from financial analysts Defaqto.
The biggest cuts have come from lesser-known providers that have been offering some of the top rates to draw in new customers.
The worst offender is challenger United Trust Bank, which has slashed its rate from a near-chart topping 1.4% to a paltry 0.2%. Punjab National Bank and OakNorth Bank have also cut their rates by 0.95% and 0.6% respectively, taking them both to 0.8%.
Supermarket banks also feature in the top of the chops, with M&S Bank and Sainsbury’s Bank both shaving rates by 0.3%.
Larger players haven’t cut rates by more than the Bank of England’s base rate cut to 0.25%, although TSB and Post Office Money have passed on the quarter-percentage in full.
Other high street providers, including HSBC, Metro Bank, NatWest and RBS haven’t cut their one-year savings rates in the last three months - yet.
Meanwhile, Saga, Charter Savings Bank, and Hinckley and Rugby Building Society have withdrawn from the battle for savers cash completely. These companies no longer offer one-year bonds, despite all three of them selling one-year bonds above the average rate of 1.2% in May.
It’s not all bad news though – both Vanquis Bank and Shawbrook Bank actually offer a better one-year savings bond than they did in mid-May. Vanquis has boosted savers’ returns by 0.16%, to 1.16%, while Shawbrook’s rate increase of 0.1% is slightly less - although it currently has the best one-year savings bond on the market, paying 1.4% AER.
Worst cuts to one-year savings accounts – 18 May 2016 compared to 18 August 2016
|Bank||Best rate on 18 May||Best rate on 18 August||Change||Minimum Balance||Maximum Balance|
|United Trust Bank UK||1.40%||0.20%||-1.20%||£2,000||£1,000,000|
|Punjab National Bank (International) Ltd||1.75%||0.80%||-0.95%||£500||£1,500,000|
|Union Bank of India (UK) Ltd||1.70%||1.20%||-0.50%||£1,000||-|
|Dudley Building Society||1.25%||0.80%||-0.45%||£5,000||£500,000|
|Julian Hodge Bank||1.50%||1.20%||-0.30%||£1,000||£1,000,000|
|Axis Bank UK Ltd||1.40%||1.10%||-0.30%||£1,000||£200,000|
We have contacted United Trust Bank UK to ask for a response, but have yet to receive one.
What the data is based on Moneywise compared the top one-year savings accounts offered by FCA-licenced deposit takers on 18 May and 18 August using data from Defaqto.
We’ve only included accounts open to new customers anywhere in the UK. We’ve excluded accounts that need at least £5,000 to open, as well as those that won’t let you put in more than £20,000.
The Financial Services Compensation Scheme is the compensation fund of last resort for customers of authorised financial services firms. If a firm becomes insolvent or ceases trading, the FSCS may be able to pay compensation to its customers. Limits apply to how much compensation the FSCS is able to pay, and those limits vary between different types of financial products. However, to qualify for compensation, the firm you were dealing with must be authorised by the Financial Services Authority (FSA).
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.
Where APR is the rate charged for money borrowed, Annual equivalent rate is how interest is calculated on money saved. The AER takes into account the frequency the product pays interest and how that interest compounds. So, if two savings products pay the same rate of interest but one pays interest more frequently, that account compounds the interest more frequently and will have a higher AER.