Banks and building societies have been strongly criticised by consumer groups for failing to pass on interest rate cuts in their loan rates whilst slashing savings rates.
The Bank of England kept interest rates on hold in July at their record low of 0.5 per cent. It is the 28th consecutive month that rates have remained at this level – the longest period of unchanged interest rates since World War Two.
Lending rates significantly higher than Base rate
The Daily Mail reports that despite record low interest rates, the average authorised overdraft rate has risen to its highest level in ten years. Since the Base rate fell to 0.5 per cent in March 2009, the average rate on overdrafts has risen from 13.61 per cent to 15.62 per cent.
While mortgage rates may have fallen in recent weeks, the interest rates on offer still remain significantly higher than the Base rate. The average two year fixed rate mortgage deal is now 4.32 per cent – almost nine times the Base rate.
Marc Gander, co-founder of the Consumer Action Group, said: “Low interest rates were intended to benefit the ordinary person in the street. It is a betrayal that the banks are not passing more of the benefit on to their customers. They don’t seem to care.”
Cuts in savings rates have cost British savers £72 billion
While lenders have maintained high rates on loans and mortgages since the Base rate fell to its record low, they have simultaneously been slashing the rates on their savings accounts.
According to financial data analysts Moneyfacts, during the 28-month period since March 2009, the average variable savings rate has been just 0.79 per cent. This equates to £21 billion total interest on Britain’s total savings balances of £1,121 billion.
In the previous 28 month period the average variable savings rate was 3.44 per cent, equal to £92 billion in interest.
The Daily Mail reports that ‘the gap between the two figures is a crippling £72 billion, a vast sum which would be in savers’ pockets if the base rate had not been slashed.’
