Base rate cut: the story so far...

21st September 2016

Following the announcement last month that the Bank of England cut the base rate to a historic low of 0.25%, a number of providers have taken action from the start of September and, as expected, the results don’t make great reading for savers.

Whilst we expected most variable savings accounts to suffer a 0.25% cut, in line with the change in the base rate, we have seen a whole host of accounts that have been cut by more than this. At the time of writing, we have picked up over 200 accounts where the cut was higher than 0.25%, a significant number that goes above and beyond what we would expect to see and a clear example of providers not acting fairly to their savers.

We have seen a number of accounts cut by more than 1% and not even accounts for children are safe, with both Danske Bank and Beverley Building Society cutting their Junior Cash ISA rates by 1%.

However, let’s not forget that often it is not just the size of the cut that is important but where the interest rate ends up. For example, we have seen Danske Bank make a cut of just 0.04% to its Midas Gold account, but this has meant that the rate has fallen from just 0.05% to just 0.01%. In a number of cases we have seen cuts like this and we have to wonder at the rationale behind it.

Some of the worst news is reserved for those who hold accounts with the big high street names, which as we know covers a significant proportion of savers in this country. For example, NatWest has announced that it will cut its Cash ISA, which can still be opened by savers, from the 31st October by up to 0.50% and will then pay a shocking 0.01% on balances up to £25,000.  Not only that but those with an Instant Saver account will also be receiving 0.01% from that date, cut from an already poor 0.25% that they are getting at the moment. Barclays account holders are also suffering with its Everyday Saver account being cut from 0.25% to an appalling 0.05% from December. Let’s not forget that Santander also plans to cut the rate by up to half, on its popular 123 Current Account from November.

The important thing to remember is there are still places where savers can get a much better return, so it is vital to vote with your feet and switch to a better deal and not to accept these low rates.

High Interest Current Accounts remain the first port of call for savers with rates far in excess of what is available on standard savings accounts, albeit on smaller balances. Whilst there are often a number of hoops to jump through and rules to adhere to, you usually will not even have to switch your main account to take advantage of the rates on offer.

As an example, you can get up to 5% AER, available from both TSB Bank’s Classic Plus Account and Nationwide’s FlexDirect Current Account. Or even for those who want a straightforward account, Tesco Bank’s Current Account has the fewest hoops to jump through and pays 3% AER. Don’t forget, you can open a multiple number of accounts to boost your savings returns and if you need any help with this, get in touch with one of our expert advisers on 0800 321 3581.

But don’t forget, there are also plenty of standard savings accounts that pay higher returns, so refer to our hand-picked Best Buy Tables for the best accounts on the market. With a selection of accounts ranging from Easy Access to Fixed Rate Bonds and Cash ISAs, there is bound to be a suitable account for your circumstances.

Don’t forget to sign up for our free Rate Tracker Service, if you haven’t done so already, where we will keep you informed of any rate changes that affect your accounts, a gentle reminder to switch to a better deal and earn a higher return on your savings.

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