Rates for savings accounts being dropped further

Savings accounts are having their rates slashed despite the fact that there has been no change in the Bank of England base lending rate for months, it has been revealed.

The last time the bank's Monetary Policy Committee voted to cut interests rates was on March 5th when the rates were dropped to the historically low level of 0.5 per cent in a bid to help the UK tackle the economic downturn.

New figures from financial services organisation Moneyfacts.co.uk show that despite no change since that period, 10.1 per cent of all variable rate savings accounts have been slashed.

By comparison, only 3.5 per cent of accounts have seen their rates rise, meaning that consumers are not reaping the rewards of competition among providers to attract their money.

According to the organisation, nearly four per cent of all accounts have registered a rate cut in the past month alone, with the Bank of Scotland dropping tariffs by between 0.05 per cent and 0.12 per cent.

Rates for accounts at Clydesdale Bank have reduced by between 0.50 per cent and 0.75 per cent, while Halifax has changed by between 0.05 per cent and 0.12 per cent.

Intelligent Finance, Leeds Building Society, Marsden Building Society, National Counties Building Society and Yorkshire Bank have also all registered rate cuts of between 0.10 per cent and 0.86 per cent.

Commenting on the figures, Moneyfacts.co.uk spokesperson Michelle Slade explained that this is going to hit savings account holders even harder in light of the low interest rates.

"Once again it is savers, such as pensioners, who rely on the income from their savings to supplement their income, who end up worse off," she said, adding that people will want to know the justification behind slashing rates when the base rate in so low.

"From the beginning of November, new regulations came into effect from the FSA requiring providers to give two months notice, ahead of disadvantageous interest rate changes," explained Ms Slade.

"It appears that a number of providers have pre-empted these changes and reduced rates before the new rules came into force."

In order to enjoy the best rates, savings account holders are advised to regularly review their tariffs by switching accounts if their current rate is uncompetitive.

Ms Slade's comments came ahead of the Bank of England's decision this week to keep interest rates frozen for another month and continue with its quantitative easing programme of printing more money.

Reacting to the move, which will also see a further £25 billion pumped into the economy, Liberal Democrat shadow chancellor Vince Cable said it shows that the bank believes economic recovery is still not in sight.

"While the Liberal Democrats support the principle of quantitative easing, it is clear that as banks continue to hoard liquidity, this money is not feeding through to the wider economy," he commented.