Savings Variable Rate Interest Rates

Samba64

Why is it that if you have a variable Rate Savings account/ ISA  - the Bank / Building Society can lower the interest rate when the Base rate falls but do not increase the rate when the base rate goes up. I have been told that that to get a better rate I would have to apply for the "newer product".

refluxer

Some banks do apply interest rate changes to their variable rate accounts when the base rate rises and some don't. For example - I have a Paragon Triple Access Cash ISA that is now paying over 50% more interest than it did when I first opened it at the end of March.

There are 4 more Bank of England meetings where possible interest rises will be discussed this year so if you don't want the continued hassle of switching accounts with your current bank, the best option would be to switch to one that does apply changes or at least has a history of doing so.

This has been discussed in previous threads if you wanted to search the forum but, off the top of my head, I've got personal experience of Marcus, Atom and Paragon all applying rate changes to their variable rate, easy access accounts and ISAs. Note that this may not necessarily be after every rate change though - some are more consistent (and quicker !) than others.

Daliah

Samba64 said:

Why is it that if you have a variable Rate Savings account/ ISA  - the Bank / Building Society can lower the interest rate when the Base rate falls but do not increase the rate when the base rate goes up. I have been told that that to get a better rate I would have to apply for the "newer product".

If you want your interest rate go up and down with the bank base rate, you need to look for index-linked accounts. These are not widely available though.

pokora

Variable means the bank may or not apply any change (up or down) when they think giving you the notice stipulated in your T&C.

Albermarle

Apart from the relatively rare  index linked savings mentioned by Daliah, the interest rate you get on your savings is what the bank/building society wishes to offer. There is no direct link between BoE interest rate and bank savings rate, although they in general trend in the same direction over time. 

jimjames

Samba64 said:

Why is it that if you have a variable Rate Savings account/ ISA  - the Bank / Building Society can lower the interest rate when the Base rate falls but do not increase the rate when the base rate goes up. I have been told that that to get a better rate I would have to apply for the "newer product".

Because you have the wrong account/wrong bank? Virgin money have increased the rate on their account a few times recently, I've not needed to do anything