Tweet
Interest rates on savings accounts are under review following today's 1 percentage point cut to the Bank of England base rate.
David Black of financial analysts Defaqto said: "With last month's base rate cut, fixed-rate bonds were being pulled left, right and centre, and the same is likely to happen this time. The banks only want to attract a certain amount of money, and they were being deluged with applications."
Within 45 minutes of today's announcement Buckinghamshire Building Society had pulled its six-month bond, which was paying 4.7% until June next year.
Last month most banks and building societies passed on at least some of the 1.5% cut to variable rate savers, and this time more are likely to pass on the full 1% cut.
Black believes the banks will be under pressure to pass the rate cut on to borrowers with loans linked to the standard variable rate, and this will have a knock-on affect on savers with variable rate accounts.
"The savings rates will come down regardless, but the amount by which they are cut will depend on the cut to mortgage rates," said Black.
For savers who are quick off the mark, there are still some accounts offering reasonable returns. Halifax's Stepped Income Reserve bond is paying an average of 5% over five years, Anglo Irish Bank's one-year bond is paying 5.75%, and the Halifax Websaver account is paying 5.75% for nine months.
Gordon Lishman, director general of the charity Age Concern, said the interest rate cut was a blow to elderly savers.
"Many older people who rely on the interest from their savings to top up their income could be hit hard by these cuts, particularly as so many are already struggling to pay basic household bills," he said.
"We would urge all older savers to shop around for the best savings deal, though of course those without internet access or with limited mobility may find it much harder to do so."
guardian.co.uk © Guardian News & Media Limited 2008 | Use of this content is subject to our Terms & Conditions | More Feeds
More...
