Dozens of high street banks and building societies have moved swiftly to cut rates on savings products following the Bank of England’s decision to lower the base rate.
Nearly 40 providers have reduced their rates, or withdrawn products, just days after the BoE’s move on Thursday last week to cut the base rate by a quarter point to 4.5 per cent.
Chase bank told customers on Monday that it would reduce gross annual rates on its saver account from 3.45 per cent to 2.96 per cent between February 13 and February 19.
Meanwhile, Barclays said that it would reduce rates on two products on Thursday, with its Everyday Saver account rate to fall from 1.50 per cent to 1.25 per cent on balances up to £10,000.
In addition, the rate on its Rainy Day Saver will drop from 5 per cent to 4.76 per cent on balances below £5,000. The rates had previously remained unchanged from September 2023.
Tim Hogg, director at consumer group Fairer Finance, said banks were “bound to pass” BoE rate cuts on to consumers.
“This can leave a bitter taste in the mouths of consumers who feel they didn’t benefit as quickly when base rates rose but, ultimately, it’s how the banking sector works.”
Of the best buys, Coventry Building Society was offering the highest rate on easy access savings accounts as of Wednesday, with 4.85 per cent, according to Moneyfacts, a financial data provider. The next highest rate on offer was 4.75 per cent on Cahoot’s easy access account.
Hogg warned savers against the “bait and switch” tactics of some providers who would “increase their easy access interest rates to make their products more attractive”.
“They’ll go to the top of best-buy tables, get more customers and then reduce their rates over time,” he said.
Such providers were “relying on the fact that many customers won’t switch [again] after that”, Hogg explained.
Fairer Finance launched a new ratings system this week to tackle the problem. It provides star ratings for easy access accounts based on their 24-month average annual equivalent rates.
The ratings are updated weekly and reward accounts that for the previous two years have offered interest rates “consistently close” to the BoE’s rates. Barclays’ Rainy Day Saver and Ford Money’s Flexible Saver accounts topped the table this week.
In contrast, homebuyers have had better news since the BoE rate cut, as Santander and Barclays announced they would offer mortgages below 4 per cent for the first time since November last year. The deals apply to mortgage loan-to-values of 60 per cent.
However, fixed mortgages do not track base rates as closely as savings products and are driven by other factors such as swap rates, which lenders use to price mortgages. Average two-year fixed residential rates have fluctuated around 5.50 per cent since the second week of January.
Additional reporting by Joshua Oliver