Consumers no better off after lower bank rates

The Bank of England left interest rates on hold last week for the first time since October, signaling the end of the rate cuts and supported the staging of possible increases later this year economists said.

However, thousands of consumers - savers and borrowers alike - have lost ground in six months the rate of reduction spree after banks and building societies do not play fair, new research shows.

Abbey customers are among the hardest hit, especially the elderly with a savings account and mortgage to the bank, said Moneyfacts, the financial firm.

Those who have savings in the 50 + have seen a percentage point to 4.65 reduction in interest rates since October from 5.6% to 0.95% - 0.15 percentage points more than the Bank of England reduced rates of 4.5 point over the period. This equates to a reduction of 233 pounds of annual interest of £ 5000 on a balance.

Meanwhile, Abbey borrowers were denied the benefit of reduced rates of the Bank as the lender has cut its standard mortgage rate by only 2.85 points to 4.25% - £ 3300 per year less for a borrower of a loan of £ 200,000 if it had passed on the full 4.5%.

A spokesperson for Abbey said: "Everything has to pay more than the Bank's base rate should be considered a good deal."

Customers with savings of Alliance & Leicester accounts fate even worse, according to Moneyfacts. A & L - taken over by the Abbey in September - Direct Saver cut by 4.95 points to 5.37% in October to just 0.42%, a decrease of £ 247.50 interest on a £ 5000 balance .

The best way to buy without notice account was reduced by 3.08% over the past six months, said Moneyfacts.

Borrowers on A & L standard mortgage rates, currently 4.99%, against only 2.2 points, to £ 4600 per year from the borrower on a loan of £ 200,000.

Another top 10 high street lender, Lloyds, passed on the full benefit from the rate reduction for borrowers, but Halifax takeover by Lloyds in January, held 1 point, to only 3.5%.

Michelle Slade of Moneyfacts said: "With each base, reducing suppliers have improved their margins by passing on much larger cuts to their investors they have to their
borrowers. Savers know some of the lowest rates ever seen , when many borrowers are unable to benefit. "

Many economists predict the next step in the rate of the Bank is in place, possibly to hit 2% by the end of the year.

George Buckley, the chief economist at Deutsche Bank, said: "The measures taken to stimulate the economy - including a quantitative, or printing of money - could trigger the return of inflation."

Barclays Stockbrokers is predicting a half-point rate hike next year.

We expect that investors and borrowers should do now.

Brokers advise borrowers to lock in fixed rate business. Owners could save £ 1900 per year if rising interest rates half a point by taking a fix now, "said Savills Private Finance.

However, some lenders have already begun to make their best offers. Last month, HSBC and Abbey were in competition for the best five-year fix at 3.99% and 3.95% respectively. They have since withdrawn the rate.

There are still some decent deals, even if - it is best to post to 4.15% with a fee of £ 599 and £ 692 per month for reimbursement. Chelsea building society offers the cheapest three-year deal to 3.74% with a fee of £ 995 and £ 623 reimbursement.

A borrower with a loan of £ 200,000 over 4% variable rate, will pay £ 1111 per month, if rates rise 1% - £ 84 more per month than someone on the face Chelsea.

However, Jean Ray Boulger of Charcol, the broker said: "Borrowers with tracker mortgages priced below the Bank rate is expected to continue to pay little or no interest to most or all of the rest of this year, or until the end of the operation. "

The mortgage is the cheapest tracker First Direct deal of life to 2.89% with a fee of £ 799 available to those with a deposit of 25%, with monthly payments from £ 937.

Louise Cuming of Moneysupermarket, the comparison site, said the tracker to deal would be a "challenge", especially as margins over rate of the Bank are now so high.

The average follow-up rate is currently over 3% above the base rate compared to 0.5% over 18 months ago, according to Moneyfacts. If rates rise by 2%, a borrower with a £ 200,000 tracker pay £ 2000 a year more on their loan.

SAVERS

There are still decent fixed rate available to new customers, but with interest rates as to increase, investors are invited to hold off locking in the long-term accounts - even as suppliers keep the best rate for long-term deposits.

For example, last week, Newcastle building society has launched a best buy savings account at 4.11%, even if you lock a minimum of £ 5000 three years away. Halifax pays 4.3% on a minimum £ 500 balance, but you will be penalized if you withdraw money within five years.

Andrew Hagger of Moneynet, another comparison site, said: "This is a trap for investors - with rates from the Bank only to rise, investors may miss the opportunity to restore the loss of interest if they set too long. "

For shorter periods, the Bank of Cyprus at the table coverage rate of 3.92%, set at 15 months on balances over £ 1.

Bank of Cyprus, however, is only partly covered by the United Kingdom, the Financial Services Compensation Scheme.

Investors should apply to the Cyprus issue deposit guarantee scheme for the first ¤ 20,000 (£ 18,000) compensation, with the FSCS topping while nearly £ 50,000.

India's ICICI offers 3.9% on a minimum deposit of £ 1000 for a year or 4.18% fixed for two years. It is fully regulated by the UK authorities, to guarantee FSCS the first £ 50,000 of deposits.