The Bank of England’s monetary policy committee voted to keep base rate on hold at 4.5% again last Thursday. But this did not stop a number of lenders reducing their savings rates.
Rachel Thrussell at Moneyfacts, a data company, said: “In addition to recent reductions from ING, NatWest, Royal Bank of Scotland, Woolwich, and West Bromwich and Scarborough building societies, last week saw cuts from Abbey, Alliance & Leicester and Lloyds TSB. And tomorrow Manchester building society will reduce one of its savings rates.”
The providers that have recently cut savings rates have not done so across the board — in many instances they have sneakily trimmed the rates on certain tiers.
For example, last Monday Abbey reduced the rate on its Easy Isa and Tessa-only Isa from 4.6% to 4.5% for those with £12,000 or more in the account.
Some of the reductions have been substantial, though. Alliance & Leicester cut the rate on its Phonesaver account for balances between £1 and £25,000 by 0.35 percentage points to 3.45%. And the rate on its Easy Saver account has been reduced by 0.25 points for balances between £1 and £2,000. It now pays just 2.6%.
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Manchester building society is lopping 0.49 points off its Premium Instant account tomorrow. The rate for accounts with more than £5,000 will fall to 1.96%.
However, none of these deals had particularly competitive rates anyway, so if you have any money in them you should look elsewhere.
Although Alliance &Leicester cut some of its savings rates, it increased others. Its Online Saver 2 is paying 5.15%, one of the best rates for instant access.
Many accounts also fail to pay customers a positive rate of return once tax and inflation are taken into account. Research from Bates Investment Services shows that 58% of savings accounts currently offer higher-rate taxpayers a positive rate of return, down from 69% in November.
To earn a positive return on savings after tax and inflation, a basic-rate taxpayer needs 2.88% or more, while those in the higher-rate band need 3.83% or more.