Savers feel the pinch as lenders focus on cheaper mortgages

FIRST-TIME buyers aren’t alone in being entitled to feel aggrieved at the impact of the Bank of England’s much heralded funding for lending scheme.

Savers have also been hit hard by the initiative, forced to watch lenders cut savings rates and concentrate instead on making mortgages even cheaper for equity-rich borrowers.

Funding for lending was launched in August to give lenders access to cheaper borrowing.

But as mortgage rates have come down – at least for those with deposits or equity of at least 40 per cent – rates on Isas and savings accounts have also been cut.

No longer having to rely on savings deposits to fund their mortgages, lenders have less need to promote eyecatching savings account rates.

Santander, ING, M&S Money, Nationwide, Virgin Money, the AA and a host of building societies have cut their savings offers in recent weeks or announced plans to do so.

The top best buy easy access accounts now pay just 2.5 per cent on average, down from 3.25 per cent in the summer, according to savingschampion.co.uk.

Perhaps most notably, the rate on Santander’s online easy access account has come down from a market leading 3.2 per cent in June to just 1.5 per cent (falling to 0.5 per cent once the 12-month bonus period ends).

Nigel Green, chief executive of the deVere Group, said: 
“There are clear signs that funding for lending is 
damaging the economy as it is prompting lenders to lower interest rates.

“Although lenders will deny that funding for lending is to blame, it cannot be a pure coincidence that rates started their downward trend in August when the scheme was introduced.”

JEFF SALWAY