Further controversy over banks’ failure to apply interest rate rise to savers

Once again many banks in the UK are coming under fire as a result of leaving savers hanging on to find out if and how they will benefit from the latest interest rate rise, which was applied four weeks ago by the Bank of England.

Banks have already been under fire since the spate of interest rate rises over the past year, and this is because they have been very quick to apply interest rate rises to borrowing in order to increase profit, but have been notoriously slow to apply the rate rises to savings accounts. In some cases the interest rate rises have not been passed on in full or at all.

The interest rate was hiked up to 5.75% after a fifth 0.25% rise in the space of a year in July. Many savers are still awaiting news from their banks with regards to how they will benefit from the latest interest rate rise. Even worse, many banks will make savers wait longer still before applying any rate rise even after informing them of what they intend to do. Amongst those that are under fire are the Yorkshire Building Society, Lloyds TSB, NatWest, and Co-op.

Some banks, such as Barclays, have passed on only a fraction of the 0.25% interest rate rise to savers, with this leading UK bank raising the interest rate on it Flexible Savings Account by just 0.05%. ING Direct customers have been disappointed by the failure of ING to pass on rate rises, and the company has been slated for this over recent weeks.

However, some savings accounts will benefit from the full rate rise being passed on, and consumers are being urged to shop around and look for a savings account that offered a decent interest rate.

Tom Smith
19th September 2007

Tags: bank of england, savings, interest, Loans, banks, interest rates