Banks increasing margins to boost profits

With the exception of Ruffler Bank, which has announced it is maintaining existing rates; nearly all the savings providers have cut their rates by the full 0.50%.

However, some providers are using the base rate cut as a way of increasing their margin for risk, by not passing on the full cut to mortgage customers but passing the cut on in full to savings customers.

As yet the majority of providers that have announced a less than 0.50% cut in SVR have yet to announce their savings cut. However, as is likely, if they follow the example of other providers, they too will pass the savings cut on in full.

Michelle Slade, analyst at, comments: “When base rate was cut, consumers thought they were finally going to start feeling some relief on their overstretched finances. They expected their savings rates to decrease, but thought they would feel the benefit by reduced mortgage repayments.

“Unfortunately the providers have used the cut as a way to shore up their balance sheets. Although it is well publicised that the banks and building societies need to do more to improve their current financial positions, consumers will feel bitterly disappointed that they are not feeling the benefits.

“Building societies appear to be the biggest offenders in not passing on the cut in full. Of the 17 building societies which have announced their SVR, 15 have cut by less than 0.50%. Only Britannia BS and Melton Mowbray BS passed the cut on in full.

“Even without passing on the cut in full, some of these building societies still have competitive SVRs. However, this can not really be said for Darlington BS and Earl Shilton BS, whose SVRs stand at 7.17% and 7.10% respectively.

“In recent weeks savers have been trying to find what they perceive as the safest home for their money and rate has become slightly less important. However, it seems any hope savers had of providers maintaining high rates in order to tempt their money from their competitors have been diminished.

“With so many providers yet to announce their intentions, it may be that they are waiting to see the outcome of the next Monetary Policy meeting before making any final decisions. Many analysts believe that the Bank of England will once again cut base rate by 0.50%, when the Committee meets next week.

“Savers looking for a variable rate savings account may be better off waiting until the dust has settled before moving their money. Otherwise they could find that they switch accounts and then the rate is cut to a level lower than what they would have received in their previous account.

“It may be a while before we really start to see the outcome of the base rate cuts and only then will consumers fully be able to see how their finances will be affected."