Savers to suffer as First Direct cuts rates further than Bank of England
From the Guardian:
Other banks expected to cut savings rates as First Direct announces its cash Isa rate will be cut by 0.4 percentage points.
One of the UK’s most high profile savings providers has announced interest rate cuts in excess of the Bank of England’s recent base rate reduction.
On Thursday the BoE reduced interest rates to a new historic low of 0.25% in a move designed to prevent a post-Brexit recession. At the same time, the Bank’s governor, Mark Carney, told banks and building societies it expected them to pass on the rate cut to borrowers and offered a £100bn fund to help them do so.
Customers with mortgages and savings rates pegged to the Bank base rate were automatically guaranteed a cut, but those with rates set by lenders have been waiting to see if the cut will be passed on.
At the weekend, First Direct wrote to savers telling them it would be reducing returns on a range of accounts from 18 October. Two accounts will see cuts greater than the 0.25% reduction announced by the BoE on Thursday.
First Direct’s cash Isa will have its rate cut by 0.4 percentage points, from 1.3% to 0.9%, while the rate on its bonus savings account will be chopped from 0.75% to 0.4%. A range of other accounts will be subject to a 0.25 percentage point cut.
In an email to customers, First Direct said: “We know this isn’t great news for savers, but even though our savings rates are not directly linked to the base rate, we’ve taken this time to review our savings accounts.”
It added: “You’ll see that we’ve reduced our Isa and one of our Bonus Savings rates by more than the base rate, but we’re confident that these rates will still remain competitive.”
Savers had long been suffering from low returns, and expectations that the Bank would reduce the base rate led to the withdrawal of many best buy accounts ahead of Thursday’s decision. One bank, NatWest, had even written to business customers warning that it could one day start to charge for deposits.
Susan Hannums, director of Savingschampion.co.uk, said the cut was “adding insult to injury” for savers. “Although one of the first to announce their plans for savers, First Direct won’t be the only provider to take full advantage of this base rate decision to cut rates.
“It is, however, always disappointing when providers use the excuse to cut rates by more than the change in the base rate, especially when rates are already so low,” she said. “Although First Direct would argue that not all their accounts are being cut by more or even the full 0.25%, this will be little solace to savers such as those holding its cash Isa.
“Our concern is they will be setting the tone for other providers to follow. All eyes will be on what the providers are doing and the worse it is, the easier it will be for others to follow suit.”
Marsden building society has also made some cuts deeper than that of the BoE. According to data provider Moneyfacts, it has reduced interest on its Easy Access Branch Saver from 0.7% to 0.4%, while its Easy Access Direct Saver is to fall from 0.65% to 0.25%.
A number of other providers have pulled accounts for new customers and relaunched them with lower rates, according to Moneyfacts. Charter Savings bank has dropped rates on its 30-, 60- and 95-day notice accounts by 0.25 percentage points. Skipton building society’s five-year fixed-rate bond now offers 1.5%, down from 2.01% before Thursday.
Rachel Springall from Moneyfacts said: “Fixed-rate savings deals are likely to be impacted by this base rate cut because savers will be looking for a secure rate to boost their cash and this demand will in turn cause a fall out of the best buys with providers struggling to cope.”
She added: “It’s highly likely the trend in rate cuts and withdrawals will continue over the coming months, so anyone looking to grab a fixed deal needs to be fast so they don’t miss out.”
Immediately after the BoE cut Santander said it was reviewing its rates, but that none of its personal and business savings accounts would see interest cut by more than 0.25 percentage points as a result of the base rate change.
It warned that it was also looking at rates on its current accounts, which include the popular 123 account.
Nationwide building society also said it was reviewing rates, but committed to maintaining the amount it paid on a range of regular savings accounts and said no cuts would be bigger than 0.25%.
From the Guardian:
Other banks expected to cut savings rates as First Direct announces its cash Isa rate will be cut by 0.4 percentage points.
One of the UK’s most high profile savings providers has announced interest rate cuts in excess of the Bank of England’s recent base rate reduction.
On Thursday the BoE reduced interest rates to a new historic low of 0.25% in a move designed to prevent a post-Brexit recession. At the same time, the Bank’s governor, Mark Carney, told banks and building societies it expected them to pass on the rate cut to borrowers and offered a £100bn fund to help them do so.
Customers with mortgages and savings rates pegged to the Bank base rate were automatically guaranteed a cut, but those with rates set by lenders have been waiting to see if the cut will be passed on.
At the weekend, First Direct wrote to savers telling them it would be reducing returns on a range of accounts from 18 October. Two accounts will see cuts greater than the 0.25% reduction announced by the BoE on Thursday.
First Direct’s cash Isa will have its rate cut by 0.4 percentage points, from 1.3% to 0.9%, while the rate on its bonus savings account will be chopped from 0.75% to 0.4%. A range of other accounts will be subject to a 0.25 percentage point cut.
In an email to customers, First Direct said: “We know this isn’t great news for savers, but even though our savings rates are not directly linked to the base rate, we’ve taken this time to review our savings accounts.”
It added: “You’ll see that we’ve reduced our Isa and one of our Bonus Savings rates by more than the base rate, but we’re confident that these rates will still remain competitive.”
Savers had long been suffering from low returns, and expectations that the Bank would reduce the base rate led to the withdrawal of many best buy accounts ahead of Thursday’s decision. One bank, NatWest, had even written to business customers warning that it could one day start to charge for deposits.
Susan Hannums, director of Savingschampion.co.uk, said the cut was “adding insult to injury” for savers. “Although one of the first to announce their plans for savers, First Direct won’t be the only provider to take full advantage of this base rate decision to cut rates.
“It is, however, always disappointing when providers use the excuse to cut rates by more than the change in the base rate, especially when rates are already so low,” she said. “Although First Direct would argue that not all their accounts are being cut by more or even the full 0.25%, this will be little solace to savers such as those holding its cash Isa.
“Our concern is they will be setting the tone for other providers to follow. All eyes will be on what the providers are doing and the worse it is, the easier it will be for others to follow suit.”
Marsden building society has also made some cuts deeper than that of the BoE. According to data provider Moneyfacts, it has reduced interest on its Easy Access Branch Saver from 0.7% to 0.4%, while its Easy Access Direct Saver is to fall from 0.65% to 0.25%.
A number of other providers have pulled accounts for new customers and relaunched them with lower rates, according to Moneyfacts. Charter Savings bank has dropped rates on its 30-, 60- and 95-day notice accounts by 0.25 percentage points. Skipton building society’s five-year fixed-rate bond now offers 1.5%, down from 2.01% before Thursday.
Rachel Springall from Moneyfacts said: “Fixed-rate savings deals are likely to be impacted by this base rate cut because savers will be looking for a secure rate to boost their cash and this demand will in turn cause a fall out of the best buys with providers struggling to cope.”
She added: “It’s highly likely the trend in rate cuts and withdrawals will continue over the coming months, so anyone looking to grab a fixed deal needs to be fast so they don’t miss out.”
Immediately after the BoE cut Santander said it was reviewing its rates, but that none of its personal and business savings accounts would see interest cut by more than 0.25 percentage points as a result of the base rate change.
It warned that it was also looking at rates on its current accounts, which include the popular 123 account.
Nationwide building society also said it was reviewing rates, but committed to maintaining the amount it paid on a range of regular savings accounts and said no cuts would be bigger than 0.25%.
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