Tesco Bank has become the latest savings provider to cut interest rates for existing customers by more than the fall in the Bank of England base rate.
The challenger bank will cut payments on its internet saver and instant access savings accounts by 0.35 percentage points in November: a steeper cut than the0.25 percentage points reduction in the Bank base rate announced on Thursday.
However, there was good news for the bank’s mortgage customers, as Tesco said it would also be making a bigger cut to its standard variable rate. From 11 August the rate will be reduced by 0.35 percentage points to 3.89%.
At the weekend, First Direct told customers it would be cutting rates on some of its accounts by 0.4 percentage points, making it the first major provider to pass on more than the base rate cut. Experts warned that more could follow, as providers took the chance to review what they were paying savers.
Tesco said that rates on its products had remained unchanged for a long while. A spokesman for the firm said the bank was keen to balance the needs of savers and borrowers.
“In recent years, market conditions have resulted in reductions in savings rates and as a consequence of this, and the MPC’s decision, we have taken the decision to set new underlying savings rates,” he said.
“We will write to all savings customers with instant access accounts, giving them two months’ notice before any change takes effect. It is important to us that customers are fully informed of the interest rates on their account and trust our decision making.”
From 8 November, the interest rate on Tesco Bank’s internet saver will drop to 0.4% while its instant access savings account will pay 0.25%. Returns on the bank’s cash Isa will drop from 0.75% to 0.5%. About half a million savers will be affected by the changes.
Some smaller providers have also made deep cuts. Marsden Building Society has reduced interest on its easy access branch saver from 0.7% to 0.4%, while its easy access direct saver will fall from 0.65% to 0.25%, according to the data provider Moneyfacts.
Meanwhile, Santander and Nationwide building society have both pledged not to lower rates by more than the quarter point cut.
[Source:- The Guardian]