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Banks cut Saving rates to 0% for first time
Depositors are getting no reward for locking their cash away
Ali Hussain
Banks and building societies have slashed savings rates to 0% for the first time following the Bank of England’s historic series of interest-rate cuts.
West Bromwich, the country’s seventh-largest building society, slashed the underlying rate on its Bonus Saver account to 0% this month following December’s one percentage point reduction. Julian Hodge, the Welsh bank, also pays just 0% on its easy-access savings account.
Moneyfacts, the data firm, said the situation would only get worse following last week’s half-point reduction to 1.5%, the lowest for 315 years.
About 40% of accounts now pay 1% or less, with 26% below 0.5%, and this is expected to go up to 53% and 39% respectively if banks and building societies pass on the latest Bank rate cut in full.
Darren Cook of Moneyfacts said: “This is the first time we’ve seen rates fall to 0% so savers are losing money in real terms if you factor in 3% inflation. There may have been accounts paying near 0% in the past, but these would have been commercial decisions, not a result of monetary policy.”
West Bromwich’s Bonus Saver account does pay a bonus of 2% but only if the customer makes six withdrawals or less a year — and as the society bills it as an easyaccess account, commentators said many savers were unlikely to get the bonus.
There are also eight accounts paying as little as 0.05% while the Bank of Ireland pays 0.001% on its Card Saver account, according to the analysis by Moneyfacts. To add insult to injury, the Bank of Ireland charges £2 for each withdrawal made at a bank branch.
The average savings rate on a no-notice account, with a balance of £5,000, now stands at just 1.48%. This time last year, the average rate was over 4.08%.
Vince Cable, the Liberal Democrat Treasury spokesman, said it was “a scary situation”. He said: “Banks need to realise that they have a duty to their depositors as well as to their other customers.”
Experts warn savers may in effect have to pay to hold their cash in an account. Leonie Kerswill at accountant Price Waterhouse Coopers said: “It’s not unprecedented as this did occur in Japan and Switzerland during severe downturns in the past. There’s no guarantee this will not happen here.”
Brian Capon of the British Bankers’ Association said: “It’s highly unlikely that people will be asked to pay banks to hold deposits. However, it is ultimately a commercial decision that an individual bank has to make.”
Depositors are getting no reward for locking their cash away
Ali Hussain
Banks and building societies have slashed savings rates to 0% for the first time following the Bank of England’s historic series of interest-rate cuts.
West Bromwich, the country’s seventh-largest building society, slashed the underlying rate on its Bonus Saver account to 0% this month following December’s one percentage point reduction. Julian Hodge, the Welsh bank, also pays just 0% on its easy-access savings account.
Moneyfacts, the data firm, said the situation would only get worse following last week’s half-point reduction to 1.5%, the lowest for 315 years.
About 40% of accounts now pay 1% or less, with 26% below 0.5%, and this is expected to go up to 53% and 39% respectively if banks and building societies pass on the latest Bank rate cut in full.
Darren Cook of Moneyfacts said: “This is the first time we’ve seen rates fall to 0% so savers are losing money in real terms if you factor in 3% inflation. There may have been accounts paying near 0% in the past, but these would have been commercial decisions, not a result of monetary policy.”
West Bromwich’s Bonus Saver account does pay a bonus of 2% but only if the customer makes six withdrawals or less a year — and as the society bills it as an easyaccess account, commentators said many savers were unlikely to get the bonus.
There are also eight accounts paying as little as 0.05% while the Bank of Ireland pays 0.001% on its Card Saver account, according to the analysis by Moneyfacts. To add insult to injury, the Bank of Ireland charges £2 for each withdrawal made at a bank branch.
The average savings rate on a no-notice account, with a balance of £5,000, now stands at just 1.48%. This time last year, the average rate was over 4.08%.
Vince Cable, the Liberal Democrat Treasury spokesman, said it was “a scary situation”. He said: “Banks need to realise that they have a duty to their depositors as well as to their other customers.”
Experts warn savers may in effect have to pay to hold their cash in an account. Leonie Kerswill at accountant Price Waterhouse Coopers said: “It’s not unprecedented as this did occur in Japan and Switzerland during severe downturns in the past. There’s no guarantee this will not happen here.”
Brian Capon of the British Bankers’ Association said: “It’s highly unlikely that people will be asked to pay banks to hold deposits. However, it is ultimately a commercial decision that an individual bank has to make.”
