Two of Britain’s biggest building societies are cutting rates for loyal savers in order to keep costs down for borrowers.
Nationwide, the largest society, with assets of more than £200 billion, will pare the rates of its Instant Isa Saver, Instant Access Saver and Smart Saver for children from June 28.
And Coventry, which ranks at No 2 in the UK, with assets of £42.5 billion, is lowering rates on 20 accounts at the start of next month.
Nationwide will pare the rates of its Instant Isa Saver, Instant Access Saver and Smart Saver for children from June 28
Experts warn other building societies could follow suit. The cuts are set to penalise loyal savers in older accounts that are closed to new business.
Both societies blame booming competition in the mortgage market. They say they have to offer lower rates to borrowers to attract them, so savers must earn less.
Nationwide — which came under fire last week for paying its four top bosses a huge £6.5 million in wages last year — says its income from borrowers has fallen in the past 12 months as a result of fierce competition.
Now, it will cut savings rates on old accounts, snatching back the increase it gave following the rise in the Bank of England base rate from 0.25 per cent to 0.5 per cent last November.
Nationwide Instant Isa Saver will fall from 0.75 per cent to 0.5 per cent; its Instant Access Saver from either 0.35 per cent or 0.5 per cent to 0.1 per cent; and its Smart Saver from 1.6 per cent to 1 per cent.
A spokesman says: ‘Most savings rates are unchanged and our rates remain competitive.’
Coventry — whose chief executive Mark Parsons earned £877,000 last year, compared with the £2.3 million Joe Garner got for doing the same job at Nationwide — also blames competition in the mortgage market.
A spokesman for the Coventry says: ‘The income we receive from mortgages is what we use to pay savers.
‘Since the beginning of the year, the mortgage market has remained very competitive. Rates are very low and this affects the income we have available to pay savers.’
The good news is that Coventry BS rates remain competitive — even though savers in old accounts will see their rates fall by as much as 0.35 percentage points.
Its easy-access Privilege Isa and Privilege Saver rates will both fall from 1.65 per cent to 1.30 per cent, while its Poppy Isa and Easy Access Isa rates will drop 0.25 points to 1.15 per cent.
Last week, Coventry launched a Limited Access account paying a top 1.3 per cent, available online or by phone.
You can make only three withdrawals a year or face a charge equal to 50 days’ interest. The rate includes a 0.3 percentage point bonus for the first year.
Big banks continue to pay a pittance.
HSBC offers just 0.05 per cent on its easy-access Flexible Saver, Lloyds Standard Saver and Halifax Instant Saver pay 0.2 per cent, NatWest pays 0.1 per cent on its Instant Saver on anything up to £25,000 and Barclays 0.2 per cent on its Everyday Saver.