Northern Rock has been forced to slash its saving range - including all fixed-rate accounts - as savers increasingly seek out 100% protection for their money.
From today, Northern Rock will no longer offer any fixed-rate accounts to new customers. People who are in the process of opening a Northern Rock fixed-rate account will lose out as part of the move, with the bank not honouring any applications yet to be approved.
Concern over the financial stability of the banking sector has led to an increased number of people withdrawing part or all of their cash savings, and spreading it across a variety of accounts to reduce exposure to any one firm, according to price comparison website Moneysupermarket.com. And a greater number of savers are turning to banks that offer 100% protection, such as Northern Rock, National Savings & Investment, Irish banks and the Post Office.
Experts have predicted that some of these institutions will have to cut their rates in order to stem the inflow of money amid concerns that their systems may not be able to cope. But for Northern Rock, the reason for the withdrawals comes down to its unique position as a nationalised savings banks, backed by the Treasury.
Under the terms of its nationaisation, Northern Rock is not allowed to increase its market share beyond 1.5% in the UK market and 0.8% in Ireland. Previously, it had a 1.9% market share in the UK and 1.3% in Ireland
The bank says it has recently seen a “sizeable” inflow of new money from savers, particularly in recent days following the nationalisation of Bradford & Bingley.
It has now withdrawn a number of saving products, including its entire fixed-rate range, its online E-Saver products, and its Silver Savings range.
The changes mean new customers will no longer be able to benefit from 100% protection through any of these products, although existing customers will see no change to their accounts.
Northern Rock will still offer its variable rate branch saver (4.90% AER), a range of fixed rate ISAs (up to 6.00% AER), its Save Direct base rate tracker accounts (3.45% AER) and its Save Direct tracker (from 3.70% AER).