Base rate lottery
In the space of just over a year we have seen three base rate increases followed by two base rate cuts. With everyone’s attention focused on mortgage and savings rates, some institutions have used the changes in base rate to increase their margins on current accounts.
Samantha Owens, head of personal finance at Moneyfacts.co.uk, comments:
“It appears that some lenders have used the base rate movements as an opportunity to reduce credit interest rates and/or increase overdraft rates.
“Institutions such as Nationwide BS, Smile and Intelligent Finance have been quick to cut their credit interest rates in the last two base rate cuts, but failed to pass on the benefit of the previous three base rate increases to their customers.
Credit Interest |
|||||||||
Institution |
Account |
11/01/2007 (0.25% increase) |
10/05/2007 (0.25% increase) |
05/07/2007 (0.25% increase) |
06/12/2007 (0.25% decrease) |
07/02/2008 (0.25% decrease) |
Current Credit Interest Rate |
Difference |
|
Base Rate |
5.25% |
5.50% |
5.75% |
5.50% |
5.25% |
||||
Leeds BS |
Premier Current Account |
+0.15% |
+0.20% |
+0.25% |
-0.30% |
-0.30% |
1.20% |
0% |
|
Smile |
Current Account |
Nil |
Nil |
Nil |
-0.25% |
-0.23% |
2.52% |
-0.48% |
|
Nationwide BS |
FlexAccount |
Nil |
Nil |
Nil |
-0.25% |
-0.25% |
3.75% (0.10% paid on balances over £1K) |
-0.50% |
|
Intelligent Finance |
Current Account |
Nil |
Nil |
Nil |
-0.24% |
-0.25% |
2.47% |
-0.49% |
|
Source: Moneyfacts.co.uk 10.3.08 |
|||||||||
“Anyone with an overdraft on a Yorkshire Bank or Clydesdale Bank current account plus will see themselves paying a hefty 4.12% more than at the beginning of 2007. Lloyds TSB was also quick to pass on up to 0.60% in the last two base rate increases, but as yet has not passed on any cuts to its authorised overdrafts.
Authorised Overdraft (EAR) |
|||||||||
Institution |
Account |
11/01/2007 (0.25% increase) |
10/05/2007 (0.25% increase) |
05/07/2007 (0.25% increase) |
06/12/2007 (0.25% decrease) |
07/02/2008 (0.25% decrease) |
Current Authorised Overdraft Rate |
Difference |
|
Base Rate |
5.25% |
5.50% |
5.75% |
5.50% |
5.25% |
||||
Lloyds TSB |
Classic Plus |
Nil |
+0.30% |
+0.30% |
Nil |
Nil |
18.9% |
+0.60% |
|
Yorkshire Bank |
Current Account Plus |
+0.27% |
+0.27% |
+0.27% |
+3.31% |
Nil |
12.95% |
+4.12% |
|
Clydesdale Bank |
Current Account Plus |
+0.27% |
+0.27% |
+0.27% |
+3.31% |
Nil |
12.95% |
+4.12% |
|
Source: Moneyfacts.co.uk 10.3.08 |
|||||||||
“In the last year the battle on current accounts has really hot up. There are some great rates on credit interest to be found as well as much lower rates on authorised overdrafts for those who live in the red.
Best Buy Credit Interest |
||||
Institution |
Account |
Deposit |
Gross Rate |
Funding |
Alliance & Leicester |
Premier Direct Current |
£1 |
8.19% on balances up to £2.5K, 0.1% thereafter |
£500 pm |
Abbey |
The Abbey Current Account – Credit Option |
£1 |
7.72% on balances up to £1K, 2.47% thereafter |
£1K pm |
Halifax |
High Interest Current |
£1 |
6.00% on balances up to £2.5K, 0.1% thereafter |
£1K pm |
Best Buy Authorised Overdraft |
||||
Institution |
Account |
Authorised Overdraft |
Unauthorised Overdraft |
Funding |
Alliance & Leicester |
Premier Direct Current |
0.0% |
0.00% |
£500 pm |
Norwich & Peterborough BS |
Gold Current Account |
7.74% |
24.9% |
£1.5K pm |
Nationwide BS |
FlexAccount |
9.9% |
24.9% |
None |
Source: Moneyfacts.co.uk 10.3.08 |
||||
“Nationwide BS has cut its credit interest rates whilst offering best buy rates for overdrafts. It would appear it is trying to appeal to those who use their overdraft, rather than those who maintain a credit balance in their account.
“It may well be that the reasoning behind some of these changes is the ongoing credit crunch, but with further base rate cuts predicted during 2008 we will just have to wait and see if the institutions use the next base rate as an opportunity to increase their margins further.”
Moneyfacts Group
Moneyfacts is the UK’s leading independent provider of personal financial information and our data is used and trusted throughout the financial industry.
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