UK banks are treating customers badly by not informing them about important changes to interest rates, it is claimed

News - Savings

Written by Ray Clancy

Wednesday, 28 July 2010 08:05

Many savings providers fail to keep their customers informed about important changes to interest rates on their accounts, according to new research.

Only four out of 12 UK banks or building societies investigated by consumer champion Which? Money guarantee to personally inform their customers of all savings rate changes, with most relying largely on adverts in newspapers or the chance of people popping into a branch to announce smaller rate cuts and rises.

The research found that only Cheltenham & Gloucester, First Direct, Co-op and ING Direct promise to personally notify their customers by either email or letter of all cuts in interest rates on their accounts.

Other major banks only guarantee to personally notify customers if the rate cut is more than 0.25% or if a series of smaller cuts add up to more than 0.5% over a year, its report published today (Wednesday July 28) says.

At a time when the Bank of England base rate is at just 0.5%, customers could find that they are not being notified about rate cuts which are proportionately very large.

The organisation says that the Bank of Scotland, Halifax and HSBC add to the confusion by claiming they may or may not personally notify consumers about smaller rate cuts, while Nationwide Building Society makes no commitment whatsoever in its terms and conditions to personally notify customers of changes to interest rates, no matter how large the cut may be.

‘Our rigorous research shows that outdated and inconvenient methods of notice on interest rate changes are keeping savers in the dark for longer, at a time when they need greater disclosure than ever before. This is just another example of banks treating their customers badly,’ said Which? chief executive Peter Vicary-Smith.

Separate research by Which? has discovered a huge surge this year in the proportion of mortgages and regular savings accounts that are only available for people who have another product with the same provider.

This is discouraging consumers from shopping around to get the best deals and in some cases tied products offer poor value for money, as the products they are tied to may not be the best available, it says.

It found that 15% of all regular savings accounts are now tied compared with 11% in January 2010. The number of tracker mortgages that are tied have risen from 15% to 21% since then beginning of the year and the number of tied fixed rate mortgages has doubled from 9% in January to 18% in June.

First Direct is currently offering one of the cheapest five year fixed rate mortgages for borrowing 65% or less of the property’s value, but you also have to take out a First Direct current account, which pays no credit interest, the organisation says.

‘If you’re considering taking out a tied product, look at the whole package to work out whether it offers a good deal,’ said Vicary-Smith