I must admit, there aren’t often times I find myself off work and pining to be covering a story.
But in my final week of paternity leave (a healthy baby boy, thanks for asking), I was looking longingly at the news pages and wondering if I could furtively creak my laptop open and blast out some copy.
Yes, I missed the first increase to the Bank of England base rate for a decade – the entirety of my career as a personal finance journalist. Indeed, 80% of my career has taken place during the era of record-low interest rates. I’ve seen crises come and go, scandals unfold and inflation leap and subside. But no, never been able to cover a rate rise.
Despite many false dawns over the years, the calls for a rate rise could no longer be ignored. The Brexit effect has well and truly embedded itself in the economy, and with inflation racing upwards on a monthly basis, the Bank of England has decided that the era of ultra-low rates is over.
Does that mean, then, that savers can finally jump for joy? This all comes down to your appetite for exploring the best deals and whether you’ve decided to house your nest-egg with some of the lesser-known savings providers that have made the best efforts to offer competitive rates over the years.
Which? being Which?, we’ve combed the market to see what savings providers are up to. Have you heard of RCI Bank, the banking arm of car manufacturer Renault? Didn’t think so. But it has been quick to pass on the rate rise, offering people 1.3% on an instant-access account.
(You should note that RCI isn’t covered by the UK’s Financial Services Compensation Scheme, the safety net that protects people should a bank go bust. Instead, it’s covered by the French equivalent, which gives you protection of up to 100,000 euros).
How about Axis Bank, or Atom Bank (which is operated solely by smartphone app)? They pay the top fixed rates, paying between 2.05% and 2.45% a year on a variety of fixed-term deals.
And while there are big high-street names who have confirmed that they will be passing on the rate increase to their savings customers – with the likes of Nationwide stating that will bring savers back up to the rate they were earning before the base rate was cut in August 2016, and NS&I, TSB and Santander increasing rates on some or all of their accounts (the latter applying the hike to accounts linked to the base rate), the big four have been remarkably quiet about their plans.
At the time of writing, Lloyds Banking Group (which covers Lloyds Bank, Halifax and Bank of Scotland), RBS, HSBC and Barclays all told us that the rates they offered to customers were ‘under review’.
When the Financial Conduct Authority, the UK’s financial watchdog, investigated the cash savings market back in 2014, it found that two thirds of savings balances were held with the biggest providers. And so, a week on from the first rate rise in a decade, it’s incredibly disappointing to see that the guardians of the nation’s savings aren’t doing their bit to pass on this much needed increase to savers.
After all, high-street lenders, in anticipation of the rate rise, have been increasing the cost of mortgages for quite some time. Most companies were quick to pass the 0.25% bump to their standard variable rates. And data from Moneyfacts, published earlier in October, showed that 21 lenders upped their rates on fixed-term deals slightly in the first week of October, when swap rates increased – but crucially before the base rate increased.
Some lenders have tried to maintain some balance. Nationwide, for example, pledged to shave off up to half a percent from some of their fixed-rate deals this month, at the same time confirming that customers on variable deals would face increases in line with any base rate rise.
But the biggest banks should not be dithering on increasing savings rates, especially where they’ve been quick to hike mortgage rates. Savers have had it tough for a decade, and this is the first ray of sunlight they’ve seen. The right thing to do for customers would be to pass on the rate rise straight away, letting customers know that their institutions are a trustworthy home for their savings.
Those are the kinds of interest rate increases I love to write about.