The Monetary Policy Committee (MPC) at the Bank of England has raised the base rate by another 0.25% at the latest policy committee meeting on 10th May. This is the 12th consecutive rise and takes the base rate up to 4.50% - the last time it was at this level was October 2008. The MPC sets monetary policy in order to try to meet the 2% inflation target, and preferably in a way that helps to sustain growth and employment. This increase was voted by a majority of 7–2. Two members preferred to maintain bank rate at 4.25%.
According to the MPC minutes “CPI inflation is expected to fall sharply from April, in part as large rises in the price level one year ago drop out of the annual comparison. In addition, the extension in the Spring Budget of the Energy Price Guarantee and declines in wholesale energy prices will both lower the contribution from household energy bills to CPI inflation. However, food price inflation is likely to fall back more slowly than previously expected.”
So, there’s some good news and some bad news! That said, they have been predicting a more rapid drop in inflation for the last couple of months that has yet to come to fruition. We'll have to wait and see what the April figures are, at the next inflation announcement on 24th May.
In the meantime, with the base rate up at 4.50%, which means that any excess cash the banks and building societies deposit at the Bank of England will earn this rate, surely this means we have also all seen the rates we are earning increase generously? Well, in some cases, although none but tracker accounts have risen at the same level as the base rate. That said some providers have definitely been better than others.
The Good…
First, let’s start with some of the best providers.
Kent Reliance, for example has increased the rate of all is closed Easy Access accounts to 3.50% - a highly competitive rate when compared with today’s best buys. This is a rise of over 3% since December as the rate that applied before the rate hikes was 0.45% AER.
Skipton Building Society is another of the good guys. The mutual provider has increased rates by at least something, following all but one of the base rate rises. It too is paying existing customers competitive rates. For example, those who hold the eSaver Issue 10 which was paying between 0.15% to 0.35% in December 2021, depending on the balance, are now earning 2.95% regardless of how much they have. And, like Kent Reliance, Skipton Building Society has already pledged to pass on the latest base rate hike on at least some accounts. We’ll be keeping an eye on the details.
Aldermore is another provider who is doing the right thing by its customers. The bank’s Double Access Account Issue 1 was paying 0.75% in December 2021, just prior to the base rate hikes. Today it is paying 3.55% to new AND existing customers, as the account is still available to be opened. This means it’s still on our best buy tables.
As well as these, there are plenty of other accounts that have been on the up – supporting both new and existing savers. Investec, RCI Bank, Ford Money all offer simple savings accounts that offer the same rate to all their savers. And have been increasing the rates regularly – currently Investec is paying 3.51% AER and the others all are paying 3.45% AER.
These few examples show that it is possible to treat your customers properly.
The Bad…
For a long time I have encouraged savers to move their cash away from their high street banks, as they are renowned for paying some of the worst rates on the market. So much so, that a Treasury Select Committee recently called for four of the big banks to explain why they are not passing on the good base rate news to savers. This seems to have a have has some effect, but not a lot.
For example, even with the pressure from the Treasury Select Committee, Barclays and Santander are still paying just 0.70% AER on their Everyday Saver accounts – an increase of 0.69% compared to the base rate rising by 4.40%!
The best of the bunch are HSBC, paying 1.30% AER on its Flexible Saver and NatWest, which is paying 1% if you have between £1 and £24,999, 1.66% AER if you have between £25,000 and £99,999, 2.17% AER on balances of £100k to £249,999 and 2.53% if you have more than £250k.
But you can earn as much as 3.71% elsewhere. If you have £20,000 with HSBC or Santander you would earn just £140 gross a year, whereas you could be earning £742 a year with Chip.
The Ugly…
Finally, a special shout out goes to Virgin Money which has failed to pass a single bit of the 4.40% increase in the base rate rise to its Everyday Saver customers. This terrible account is still paying just 0.25%. On the above mentioned £20,000 deposit, all you would take home after a year is £50 gross!!!
It’s simple, if you have money is this account, or any other poor paying account, move it as soon as possible. Let’s not reward the banks for their appalling behaviour.
@savingschampion
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