One month on from the base rate rise, savers have seen little benefit from it, with just one in six savings accounts increasing by the full amount – even as half of providers upped their mortgage rates, new analysis from Which? has revealed.
We tracked changes to savings accounts and mortgage standard variable rates (SVR) over the past month to reveal how banks have handled the base rate rise – and how many providers implemented double standards for savers and mortgage holders.
Our analysis found that banks and building societies have been eager to push up the costs to variable rate mortgage holders, but haven’t necessarily passed on better returns to savers.
Find out how banks have treated their customers, and how to find the best deal.
How did banks react to the base rate rise?
On 2 August 2018, the Bank of England increased the base rate by 0.25 percentage points, up to 0.75% – the second increase in a year.
A higher base rate makes it more expensive for banks to borrow money from the Bank of England. In response, banks generally increase the cost of borrowing for customers, and raise interest rates on savings to encourage more deposits.
But banks don’t always treat their customers in the same way.
Of the 256 instant-access savings accounts in the market, just a third saw their rates increase between the base rate rise and 3 September, Which? research found – and just 40 (15%) increased rates by the full 0.25%.
The trends were similar for instant-access cash Isas, with just 15.63% of the 123 instant-access accounts increasing by the full 0.25% – and 70% (80) staying unchanged.
By contrast, lenders were eager to pass on an increase to mortgage rates.
Of 87 providers, 44 (50%) upped their SVR after the base rate increase, pushing up costs to mortgage holders. All of them opted to pass on the full 0.25%, except Principality Building Society and Bath Building Society, which went up 0.15%.
|Rate changes||Instant-access savings accounts||Instant-access cash Isas||Mortgage SVRs|
|By full 0.25%||16%||14%||48%|
|Less than 0.25%||18%||17%||2%|
Which providers have ‘double standards’?
Our research found eight providers that failed to increase their instant access savings rates before 3 September, but did implement a 0.25% increase to mortgage rates.
This means customers on standard variable rate mortgages faced higher costs, while savers saw no increase to their returns.
Some providers implemented increases to the mortgage SVR within a week of the base rate decision, but failed to increase savings rates until mid-September, or even October – meaning customers paid more for their mortgages for more than a month before benefitting from increased interest.
Another 12 providers raised their savings rates, but by less than 0.25%, even though their mortgage rates increased by the full amount.
The same pattern of unfair practice played out after the last base rate increase in November 2017, Which? analysis found.
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Which? calls for banks to be fair to savers
With more base rate hikes expected in the near future, Which? has called for banks to pass on rate rises to savers.
Gareth Shaw, Which? Money expert says: ‘August’s rate rise saw clear double standards from some financial institutions, hiking the bills of mortgage holders, while denying savers the full benefit and actually withdrawing some of the most competitive deals altogether.
As banks react to the latest rise, we’re calling on banks and providers to be fair to their customers across the board.’
How can you find the best savings account
If you’re looking for the best savings rate, it pays to shop around.
The best instant-access savings account currently available to all savers is the Internet Saver Account from BM Savings, paying a 1.35% AER. Alternatively, you could opt for the Coventry Building Society Limited Access Saver, which pays 1.4% AER, but you’ll be limited to three withdrawals a year.
If you’d prefer to pay into an instant-access Isa, the best account on the market is the Al Rayan Bank Instant Access Cash Isa, paying 1.35% EPR. Note that this bank offers an expected profit rate, rather than interest.
By locking your money away in a fixed-term account, you may be able to earn higher returns. But keep in mind that you’ll miss out on an increases to savings rates if the base rate rises again in future.
You can compare hundreds of savings accounts and Isas with Which? Money Compare.
How to find a cheaper mortgage deal
If you’re currently on your lender’s standard variable rate, you may have seen your mortgage payments go up in recent months.
Customers often get moved onto the lender’s SVR when their fixed-rate or discount deal has expired.
In this situation, it may be worth remortgaging to a new fixed-rate deal – you’ll have security over your interest rate and be protected from any future increases.
As with other financial products, it pays to shop around and find the best deal for your circumstances. Speaking to a qualified mortgage broker can help you find the best deal.
Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.