Banks pushed to share base rate rises
Banks are coming under growing pressure to pass on the full benefit of base rate increases to savers after growing evidence they are getting a raw deal from the big banks.
While interest rates on home loans have shot up in the wake of last month's quarter-point rise in the base rate, savings rates have been slower to move and have been lifted by a much smaller amount.
Mortgage rates have been raised by an average of 0.18%, but savings rates have barely moved, according to analysis by Moneyfacts magazine. The interest on instant access accounts has been raised by an average of 0.07 of a percentage point, while 90-day notice accounts are only 0.05% higher yielding.
Most of Halifax's 13 million depositors have seen an improvement in rates of only 0.1%, while their borrowing counterparts have seen mortgage interest raised by the full 0.25%. Banks also exploit timing differences to massage margins. Mortgage increases took effect as early as 8 November, four days after the rate rise, while savings rate announcements take longer to come out.
Cheltenham & Gloucester, which has lifted its home-loan rate by a thumping 0.39%, has yet to move on savings rates. The big financial institutions are fattening up margins, according to Mick McAteer, senior policy adviser with the Consumers' Association. 'The High Street banks rely on inertia and confusion to sell poor-value financial products,' he said.
New deposit-takers offering more generous savings rates - like Prudential's Egg and Internet-based banks - appear to have had little effect on the mainstream banks' rates. Margins are likely to come under scrutiny from the Govern-ment-ordered investigation into banking competition headed by former Oftel boss Don Cruickshank.
The industry argues that low inflation means savers are getting a comparatively good deal. Nationwide Building Society says: 'Low inflation and strong competition have combined to produce strong real rates of return for savers. Real savings rates, on average, stand at their highest level since the Eighties boom.'
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