Savers may want to steer clear of Northern Rock
February 28, 2008
Industry experts are warning that consumers that are thinking of transferring their savings to Northern Rock may want to consider the likelihood that interest rates on savings may go down following the bank’s nationalisation, which has now gone through.
Government officials stated that the nationalisation of the bank meant that it was safe for consumers to start giving their business to the stricken bank, but other officials state that the move may result in savings interest rate being cut, leaving savers receiving a lower return on their savings.
One industry official stated: ‘Northern Rock certainly has some attraction for savers, who may be drawn to it given the increased safety it offers over other banks, but when it is nationalised, it may decide to start to reduce these rates.’
She added: ‘You have to ask: what are they going to do with the money coming in? High interest rates are what banks use to bring customers in so they can use the money to finance their loan books, especially now as they are finding it hard to get the money elsewhere because of the credit crunch. But what if you don’t have a loan business? You don’t need that extra custom.’
With interest rates already having fallen twice in the past three months and set to fall further over the course of the year a number of other lenders have already announced cuts in their savings interest rates. Egg has upset customers further by slashing its savings interest rate by 0.5% despite the base rate cut only coming to 0.25%. One banks, Icelandic newcomer Kaupthing Edge, has decided to keep its interest rate at 6.5% for savers, and this is likely to attract a lot of attentions from savers looking to get good returns on their money.
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