THE NUMBER of savings accounts paying interest above the base rate has slumped to almost a decade low despite the Bank of England starting to raise rates, new data shows.
The Moneyfacts UK Savings Trends Treasury Report reveals that the number of savings products offering base-rate beating interest has fallen by 150, the largest drop since February 2008, as providers fail to pass on November’s rate rise to consumers.
Moneyfacts found that just 69 per cent of all savings accounts in the UK market pay out more than the Bank of England base rate of 0.5 per cent.
However, it noted average variable rates on no-notice savings accounts and ISAs had increased from 0.06 per cent in November to 0.45 per cent and 0.68 per cent respectively.
Charlotte Nelson, finance expert at Moneyfacts, said savers would be disappointed with this trend.
“The main banks have been very selective over which products receive a rate rise, as regardless of the increase to the base rate, these providers still do not want savers’ funds. It will take a lot more than a 0.25 per cent rise to see them compete for the Best Buys again,” she said.
“Savers hoping that the base rate rise would cause better rates will be sorely disappointed by this latest news. Savers will now have to take matters into their own hands and revaluate their accounts to make sure they are not on a rate that pays less than the base rate. If they are, voting with their feet is their only option.”
‘Big three’ peer-to-peer lender RateSetter predicted ahead of November’s rate hike that such a move would have limited effects for savers.
“It should be welcome news for the millions of savers across the UK if the banks part with tradition and pass the increase on to savers quickly and in full…But banks are not obliged to pass on changes in the base rate,” RateSetter said in a blog post on its website in October.
“In fact, by widening the spread between the interest rate that they give to savers and what they charge for borrowers, banks traditionally increase their margins as interest rates rise.
“While – if it is passed on to savers – an interest rate increase would be seen as a positive step, we know that its impact would likely be limited: savers will continue to see the returns on their bank accounts entirely eaten up by inflation.”