First Direct leads the way in cutting rates
‘First Direct has become the first lender to cut rates on savings accounts following the Bank of England’s base rate cut. The bank’s cash ISA rate is to be cut from 1.3% to 0.9%, while the rate on its bonus savings account will fall from 0.75% to 0.4%.
It’s a shame that whilst the Bank of England is encouraging banks to pass on rate cuts to borrowers through their Term Funding Scheme, there is no equivalent scheme to encourage banks not to reduce savers’ rates by more than a 25 reduction in basis points (i.e. the same as the 0.25% cut in base rates). Millions of savers, such as pensioners, continue to be unfairly squeezed by the banks who reduce saving rates by more than the reduction in base rates (or when base rates increase, don’t pass on the full increase to savers).
We’re not singling out First Direct here, but note that whilst base rates have fallen by 0.25% they have reduced rates on their ISAs by 0.4%, and by 0.35% on their bonus savings accounts. At least in both cases their rates are well above the base rate, which is certainly not the case with every bank. But we would like to see a more level playing field between savers and borrowers so that savers will not continue to suffer when there are future changes in base rates.