Many households and businesses have suffered the impact of a series of interest rate hikes over the past eight months. Since December 2021, the Bank of England has increased interest rates six times, taking the base rate from 0.25% to 1.75%. The last rate hike was double that of the previous ones, with a rise of 0.5%. This comes as the central bank aggressively tightens monetary policy in light of soaring inflation.
Banks have acted quickly to pass on rate increases to borrowers, putting many households under severe financial pressure when many are already struggling with living costs. However, according to research, the same is not happening when passing the rate increases on to savers, with millions being short-changed as a result.
Failing to pass on the latest rate increase
According to reports, banks and building societies have not passed on the latest rate hike of 0.5% to savers. So while savers will have been pleased about the rate hike the Bank of England implemented earlier this month, their enthusiasm was short-lived as they have not seen any benefit.
Over recent years, savers have been hit with deep interest rate cuts, which has had a massive impact on their savings. However, with rates on the rise and the latest hike being a larger one, many have been looking forward to seeing their money grow. Unfortunately, the failure of banks and building societies to pass on the rate hike means many will be left waiting.
Data shows that by the middle of this month, only two out of 233 easy-access savings accounts had received the 0.5% rate increase. Furthermore, only 11.2% of easy-access accounts had received any rate increase following the August base rate hike.
A report from Investing Reviews indicated that the only financial institution to have passed on the entire increase was the West Bromwich Building Society. Others, including Skipton Building Society, Tesco Bank, Gatehouse Bank, Atom Bank, Tandem Bank, and Zopa, passed on the rate increase in part.
Still catching up
Some officials have claimed that the delay in passing on the rate increase is down to many banks and building societies still catching up with previous rate increases.
One official said: “To be fair, it is a little early to see savings changes … Some brands may only now be catching up to prior base rate rises.”
Rachel Springall from Moneyfacts spoke about the speed of passing on rate increases to savers earlier this year. She said: “As we have seen time and time again, there is no guarantee savings providers will boost their rates because of a Bank of England rate rise and, even if they do, it could take a few months to trickle through to customers.”
However, many savers will be frustrated that financial institutions do not waste time passing on rate increases to borrowers but appear to drag their feet regarding savers.