Mortgages Direct

As average savings rates fall below inflation, Nationwide Building Society demands introductory savings rates expirations should be well revealed to those individuals counting on the introductory rates.

The demand from Nationwide follows the interest rate cute in December, which reduced the rates of savers by more than 0.25% off the base rate. Customers who pay little attention to their accounts and the return they receive on their savings are the primary victims of the rivalry taking place between firms, claimed Nationwide.

Matthew Carter, Director for Savings at Nationwide, said, “The savings market is a highly competitive one and providers are vying to take market share. Some providers seem more interested in boosting profit and achieving best buy status than actually offering long-term good value to their customers.”

“Consumers are told when their mortgage deals are due to change and it shouldn’t be any different for savers. With introductory deals becoming more common-place, the society is concerned it is becoming even harder for savers to make the best decision.”

The building society wants savings providers to alert customers when their account interest rates dip and provide improved customer service when better deals are available. Currently, many banks and building societies attract customers with initially high interest rates on savings accounts, with the usual duration of the rate lasting for a year. After the first year, savings interest rates fall well below the Bank of England’s base rate. But for those individuals striving to keep their finances sound in a very rushed society, the sudden drop in interest paid for their deposits often comes at a great surprise and additional stress.

“Often a simple no strings account will offer an equally good return, without the need to jump through hoops or navigate a maze of complex terms and conditions,” said Lisa Taylor, at personal finance information firm Moneyfacts.co.uk. Instead of constantly needing to research each promotion, she advices customers to find accounts with steady interest rates which will perform well over time.

“With such a fast changing market, unless you are prepared to move your savings on a very regular basis, a consistently good performing account will offer a good return, without all of the time and effort of constantly searching the market.”

“Some savers have seen their rates axed by more than double the base rate cut. And with many of the accounts already offering uncompetitive rates, the proportion of the rate shaved off is much higher,” added Ms. Taylor. “Many of the worst hit accounts are no longer heavily marketed and are probably held by long standing customers who have held the account for many years. It’s just another example of when loyalty does not pay.”

“Take the example of the Halifax Liquid Gold, which saw a 0.36% cut. When we consider the rate was only 1.36% in November, the cut means more than a quarter of the whole rate vanishing.”Obviously Halifax’s “gold” is less “liquid” than they make it sound.

Other lenders to cut savings rates include big names such Alliance & Leicester, Abbey, HSBC, Halifax, Lloyds TSB, NatWest, and the Royal Bank of Scotland. The firms with highest assets, apparently seek to gain the most from their individual depositors, who, in today’s economy, can often afford veiled banking practices the least.

Ms. Taylor also offered, “Moneyfacts.co.uk average savings rate is currently 3.77& (no notice at £1K), which is already lower than the current rate of inflation. Too many savers are keeping their hard earned savings in accounts which will in the long term see their savings fall in value.”

But there is still great power in consumerism for those who take a little extra time and shop for the best banking rates – and those individuals will reap the greatest rewards.

Brokers, such as John Charchol’s Ray Boulger, note that homeowners can expect to pay £105 more on their mortgage interest because of the Bank of England’s hesitation to cut the base rate by 0.25% recently. As a result, mortgage borrowers all over Britain will see higher payments until the decrease is made.

The delay comes at a time when the cut would have been most needed and justified. Mr. Boulger was among those most expecting the change and added that other “negative economic statistics” supported the impending rate cut.

Mr. Boulger pointed to industry wide price changes and the effects of inflation, such as npower’s 17% price increase, that could poorly effect Britons if the interest cut is not made soon. Although the consumer price index inflation is higher than it has been in the past, it is still only slightly above the central 2% target, Mr. Boulger added.

Despite the slowing effect the global economy is having on inflation in Britain, Mr. Boulger warned, “If the monetary policy committee delays the next cut too long Bank rate may have to fall further than would have been the case with an earlier cut.”

According to MoneySupermarket.com, secured loans could see a rise in popularity this year among homeowners seeking a lower interest rate in the future.