Craig Donaldson, Chief Executive Officer at Metro Bank, said:
“Our research reveals a widespread practice among many banks of cutting rates on savings accounts for existing customers below the rates paid to new customers. These cuts are often used to subsidise new higher rate accounts in a bid to entice new savers, regardless of the fact that existing loyal customers are losing out. No loyal saver should be penalised in this way.”
The research also found that all of the 10 providers analysed had cut rates for their existing customers in the last three years. Out of 456 savings accounts reviewed, over a third (35%) reduced rates (outside of bonus rates expiring), by an average of 0.46%; meaning a total loss of nearly £4.7 billion for UK savers.
Nearly half of these cuts (45%) were 0.25% or less, meaning under current FCA rules, the providers would not have had to inform their customers of the rate reduction.
Donaldson continued:
“Providers do not have to inform existing customers if rates are cut by 0.25% in one go, to a total of 0.5% a year. We believe banks should be forced to let customers know personally about every rate change, and at the same time, inform customers of any better suited products available to them. As an industry we must improve relationships between banks and consumers - transparency is something that must be encouraged and supported by the FCA.”
Santander’s customers saw the highest cuts in their rates; with an overall average reduction for existing customers of 0.69%. Its largest cut was 1.86% which it deducted from its eSaver Issue 5 (previously Alliance & Leicester), leaving existing customers with a rate of 0.50%.
Susan Hannums, Director at Independent Savings Advice site Savingschampion.co.uk said:
“Many well-known providers have been taking full advantage of savers’ inertia. Savers should be able to trust their bank not to cut their rates at the expense of new customers. As thousands of existing savers have seen their rates reduced in recent years, many plummeting to record low levels, more needs to be done to improve the desire and confidence to save.”
