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Banks cut saving rates

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by Kay Mitchell

Savers are being told to be wary as banks slash savings rates on some leading accounts.

In just one month, rates could be slashed by up to 0.5% as banks inflict a double blow on savers. It started with surprise cuts prior to the Bank of England reducing interest rates by 0.25% to 5.5% earlier this month. A second round of cuts is expected on January 1.

The move will allow banks to edge around the Banking Code which insists they inform savers if they move rates by more than 0.25% compared with base rate. They can also increase rates by up to 0.5% out of line with base rate in a rolling 12-month period without informing customers.

In the last few weeks, major banks that have cut their rates include Abbey, Barclays Halifax, Lloyds TSB, NatWest and RBS.

In November, Lloyds TSB introduced new internet-based account, Internet Saver and closed its Online Saver to new customers. Just 3 days before interest rates reduced, it cut the rate paid to Online Saver customers by 0.25%.

On December 4, NatWest cut rates by up to 0.2% with the worst cuts on its 90-Day Bonus Reserve account, where 90 days’ notice has to be given to withdraw funds. Rates now start at just 3.44% (4.3%) on £10,000 if you do not qualify for the extra interest on limited withdrawals or 3.84% (4.8%) if you do.

Finally, RBS cut rates by 0.2% on its Bonus 90 Account and trimmed 0.1% off its 60-Day Isa.

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News posted: December 20, 2007

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