Banks hold back on interest rates on savings
With three interest rate hikes over the past six months, consumers in the UK have been hit hard in terms of repayments on variable rate finance. The Bank of England raised interest rates by a quarter of a percent in August 2006, taking the rate from four and a half percent to four and three quarter percent. A further rise of a quarter of a percent was enforced by the Bank of England in November, which took the rate up to five percent. And more recently, a third interest rate hike of a quarter of a percent was applied, which took the rate to five and a quarter percent.
With all of these rises many consumers in the UK are facing crippling repayments on their mortgages and other variable rate finance deals. However, what about the consumers that have savings? The rise in interest rates should spell good news for these people, yet recent studies have shown that banks and building societies are far slower at applying interest rate rises to savings and investments than they are at applying them to borrowing.
The survey was carried out for the BBS, and based on the results of the survey the conclusion was that interest rate rises were affecting borrowers far more quickly than they were affecting savers. According to the survey results savers could be losing out on a small fortune because of the delay in the application of interest rates to savings accounts. Borrowers, on the other hand, are hit straight away, which means that banks don’t lose out on any interest rate rises.
Moneyfacts, which carried out the research last year on behalf of the BBC, said that the average time for interest rate hikes to be applied to borrowing was around twenty days, and for savings accounts this was stretched to thirty days.
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