Leading lenders have cut the rates on a number of their savings accounts as banks decrease their reliance on savers for borrowing in the wake of the government’s Funding for Lending Scheme (FLS).
Financial institutions including Barclays, Lloyds Banking Group, Nationwide BS, Santander and RBS Group have signed up to the FLS, a scheme which is designed to offer lenders access to finance at lower rates than those that are commercially available.
Although savings created by the FLS are designed to be passed on to customers, Jason Riddle, from the campaigning group Save Our Savers, argues that lenders are now in a position where they can afford to drop rates.
“Financial institutions have been awash with savers’ cash in the past few months,” he said.
“They can afford to cut rates, knowing the majority of hard-pressed savers have nowhere else to turn.”
In the last few weeks Santander has made number of significant cuts to its savings accounts. Its fixed-rate cash ISA has fallen from 4% to 3.3%, while rates have also dropped on its esaver for new customers.
A Santander spokesman said; “We constantly review our range in line with market conditions and competitor movements.”
Last week Halifax also slashed the rate on its two-year fixed cash ISA rate to 2.75% from 3.25%. This means that new savers will miss out on £100 of tax-free interest over the term on each £10,000 in their account.
Fixed-rate deals on bonds have also been subject to cuts. The top rate available on a one-year fixed-rate bond is now around 2.4% after tax, down from 2.8% recorded three months ago.
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