Savers missing out on interest

The Bank of England yesterday (June 7th) froze interest rates at 5.5 per cent but many savers would not have seen any benefit if the rate had risen anyway.

Despite there having been four rate rises since August 2006, the Post Office says that many high street savings providers have not been passing on the benefits.

Interest rate rises are generally viewed as having a negative impact on most people, as those with a loan, mortgage or credit card see their repayments increase.

However, people with savings benefit from a rise in the base rate but only if the provider passes on the new rate.

“Banks and building societies are quick to raise mortgage rates in line with base rate increases, but less inclined to pass on the benefits to their savings customers,” said Richard Norman, head of savings at the Post Office.

“There have been four base rate rises in the last year and the majority of savers have missed out on the full benefit of these.

“Although the Bank of England decided to hold rates today, further rate rises are expected. To make the most of their money, savers need to ensure they check which accounts will consistently pass on rate rises and switch,” he added.

Much like a mortgage with a fixed-rate period, many savings providers offer customers a guarantee that the interest they earn will increase in line with inflation for a specified period of time.

Tags: england, money, interest rate, period, mortgage, Post Office."There, Financial institutions