Consumers should keep an eye on their savings rate
May 21, 2007 by admin
Filed under News, News-Banking
Consumers are being urged to keep an eye on their savings rate following the latest interest rate rise by the Bank of England.
Banks and building societies are often notoriously slow at applying any interest rate rises to savings account, yet are quick to apply them on borrowing, which means that they make maximum profits from any interest rate rises. The Bank of England has raised interest rates four times in the last nine months, taking them from 4.5% last August to 5.5% earlier this week. However, although borrowers quickly see repayments on variable rate loans and mortgages going up, savers do not benefit from the same speedy action.
In some cases, according to industry experts, banks and building societies simply leave the interest rate on savings unaltered, and most consumers fail to notice or concern themselves about this, leaving the banks to rake in million in additional profit.
Experts are urging consumers to keep on eye on their interest rates on savings every time the Bank of England imposes another interest rate rise, and to make sure that they either see the rate reflected on their savings account or consider switching accounts to one that does offer a competitive rate of interest.
Many of those with savings account may have to wait until June to see any rise in interest rates on their savings, and even this small delay could rake in huge profits for banks and building societies.
Kevin Mountford, head of savings and current accounts at moneysupermarket.com stated: ‘It takes providers an average of 20 days to pass on an interest rate rise. With each half per cent rise bringing in £12m per day in interest it’s easy to see why providers delay. If the reason for the average 20-day delay is operational then banks and building societies should backdate the rise.’
Tom Smith
21st May 2007
