Interest rates on savings accounts plummet

Interest rates on savings accounts plummet

	Published : Sun, 11 Jun 2006 09:25 By : Paula Demarzio Print this Story

LONDON - The interest payments on savings accounts have been taking a quiet beating from the beginning of the year, although the Bank of England voted Thursday to keep the interest rates steady for the tenth month in a row.

Standard Life Bank and Barclays last week have joined other banks in culling the rates of interest payments. Standard Life Bank cut the rate by at least 0.13 percent on some accounts, while Barclays culled the rates on the e-savings and cash mini-Isa accounts by 0.45 percent. This means that consumers who have deposited £9,000 in a cash mini-Isa account in Barclays will now receive interest at only 4 percent down from 4.45 percent previously. And savers having £25,000 in the e-savings account will get 4.04 percent down from 4.13 percent.

Andrew Jones, Barclays' retail banking product director, explained the change of rates by saying, "Most of our main competitors have already changed their savings rates and we have taken the opportunity to review ours." But some Barclays savers having £1 and £10 in a cash mini-Isa or a Tessa-only Isa accounts will receive 4 percent interest. Earlier, the Bank Paid interest only on £10 and above.

Analysts say that Banks are quietly going on cutting the rates, “Introducing new tiers is one way that the banks try to tweak rates without appearing to have cut them. Another ruse is to cut some rates by quite a lot and others by a minimal amount so that the average rate cut across the accounts is reduced," said Rachel Thrussell, of Moneyfacts, the financial information website.

Justin Modray, of Bestinvest said that frequent changes make it difficult to follow the savings accounts, “If savers are receiving rates that match or beat the base rate at 4.5 per cent, they are doing OK, but if their rate falls below this level, they should look for a better deal," he added.