Banks don't pass on interest rate rises to savers

25 April 2018

Banks are not passing on interest rate rises to savers, an investigation by Which? reveals. 

The Bank of England base rate of interest increased for the first time in a decade in November from a record low of 0.25% to 0.5%. 

But an investigation reveals that while banks passed on the 0.25 percentage point rate rise to mortgage customers, increasing their monthly repayments, just one in five passed on the rate rise to savers. 

Which? analysed 327 variable instant-access savings accounts and Cash Isas in the five weeks after interest rates increased.

It found that 48% made no changes to the interest the accounts paid. A further 30% increased their rate but by less than 0.25% and just one in five passed on the full 0.25% rate rise. 

Meanwhile, 13 of the top-paying accounts were withdrawn and relaunched, in some cases with a reduced rate. 

The consumer group looked at 95 providers in the instant-access savings market and found just 10% of them had applied the full rate rise to all their instant-access savings accounts and Isas five weeks after the base rate was increased. Meanwhile, 66% had not applied the full increase to any of their accounts. 

Yet when it comes to interest rates on mortgages, it seems that providers were quicker to make changes.

Gareth Shaw, money expert at Which?, says: “The last base rate rise saw clear double standards from some financial institutions, hiking the bills of mortgage holders while denying savers the full benefit and actually withdrawing some of the most competitive deals altogether.

“Ahead of a possible future rate rise, we’re calling on banks and providers to be fair to their customers across the board.” 

Mortgage rate hikes

Some 53% of lenders increased their standard variable rate for existing borrowers by December and the average rate of two-, three-, and five-year fixed mortgage deals all increased between October and December. 

Analysis of 76 fixed-rate mortgage providers found 40% had increased their average rate for five-year fixed rates. Which? research found Monmouthshire Building Society and Allied Irish Bank customers saw the greatest hikes, with each lender increasing at least one deal by 0.45%.

The greatest reduction was 0.76% on a three-year deal from Newbury Building Society. 

In all, some 497 fixed-rate deals changed after the base rate rise. Of these, 75 increased by more than 0.2%. Some 135 deals were withdrawn, including four of the 10 cheapest two-year deals. 

With many people expecting a second rate rise in May, Which? mortgage adviser David Blake says borrowers need to plan ahead. 

He says: “It’s important to properly understand the impact a rate rise would have on your mortgage payments. Even if you are currently locked into a mortgage product, it’s still worth looking into re-mortgaging to a long-term fixed-rate to help protect yourself from the financial shock of future rate rises.” 




In reply to by anonymous_stub (not verified)

So all the banks passed on the interest rate rise to mortgage payers but hardly any passed the rise on to savers. Why does this not surprise me in the slightest. Banks are only out for themselves. Don't they realise that moves like this only make their customers angry and resentful, and eventually those customers will only choose the few banks that treat them fairly. It really isn't in the culpable banks' interest to treat their customers this way as they will eventually end up with considerably less customers .

In reply to by anonymous_stub (not verified)

In the past used higher interest to make money to help pay off my mortgage. I had a Regular Saver with First Direct at 6%. That rate went down to 5%. I had a year of 5% up to £2000 with TSB Bank and they put down that to 3% up to £1500. Recently they put up it up to 5% up to £1500. I also did their regular saver at 5% and now they have it at 2%. I found a regular saver that I really like: Nationwide at 5%. Halifax put their reward down to £3.00 a month. It used to be £5.00. I paid off my mortgage in June 2018.

In reply to by anonymous_stub (not verified)

It only seems to be the smaller banks that are willing to increase rates. the big greedy banks do anything but. I've just had notification from Lloyds that they are again reducing the rate on the Club account by 0.5% probably so they can justify if we're super lucky a 0.01% rise on savings accounts. Absolutely shocking how they treat savers yet reward the likes of António Horta Osório (banker???)with vast bonus's for screwing their savers and borrowers royally. They should all hang their heads in shame

In reply to by anonymous_stub (not verified)

Why has Halifax REDUCED the interest rate on my cash ISA, when interest rates have supposed to have gone up?

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