Pressure is clearly growing on banks and building societies to pay competitive rates of interest on savings accounts whilst charging low interest rates on mortgages. This has been clearly illustrated by the Skipton Building Society’s decision to abolish the ceiling on the Standard Variable Rate which they charge mortgage customers.
Skipton had a policy where the Standard Variable Rate for mortgage customers would never be more than 3% above Bank of England Base rate, which is currently 3.5%. However, blaming exceptional circumstances, they have removed this ceiling and changed their Standard Variable Rate to 4.95%.
It is clear that striking the balance needed between low mortgage interest rates and competitive savings rates have pushed Skipton, who have nearly seven times as many savers as borrowers, into this move. Although they say it is temporary the rise of 1.45% is tough on borrowers especially at a time when inflation has taken an unexpected turn upwards and job security is low.
The question must be now whether other banks and building societies will follow in the quest to balance their books. It is possible that we could see a reduction in the rates paid to savers, a hike in the interest rate charge to borrowers or indeed both.
It has never been more important to check your savings rates to ensure you are getting the best possible interest rate.