Bank on nothing as current account rates lag

Average credit interest rates on current accounts have increased by just 0.29 per cent since October last year despite the Bank of England increasing the base rate by 0.5 per cent over the same period, new research from MoneyExpert.com shows.

Two Bank of England rate rises have been pushed through since November 2006 taking the base rate from 4.75 per cent to 5.25 per cent with another rate rise predicted for May 10th. And current accounts have come under fierce pressure over fees and are facing an Office of Fair Trading investigation

However the independent financial comparison website’s research shows average credit interest rates on current accounts have only increased from 1.55 per cent in October 2006 to 1.84 per cent now.

And that includes high-profile launches such as Alliance & Leicester’s Premier 21 account paying a whopping 10 per cent for customers aged 16-21 and other offers from firms such as Halifax and Bank of Scotland paying six per cent.

Currently there are still around 47 out of the 105 accounts on the market paying one per cent or less for customers who are in credit on their current account. That is marginally worse than October 2006 when they were 45.

Sean Gardner, Chief Executive of MoneyExpert.com, said: “Current accounts are the major personal finance issue in the UK at the moment with customers rebelling over fees and the OFT launching an investigation.

“Despite all of that the average rate paid for customers who keep cash in their accounts has barely budged in the face of Bank of England pushing up interest rates.

“Our own switching index shows around 12,700 people are switching current accounts every day. That figure is certain to keep climbing as more and more people realise there are better deals available. And there genuinely are some excellent bank accounts out there.”

MoneyExpert.com’s switching index shows the number of people leaving their bank soared by 453,000 in the last three months and around 2.29 million people have ditched their bank in the past six months.

The Banking Code states that current account providers have to provide details of standing orders and direct debits within three working days of a request from a new bank. The new bank has to provide details of the new account within 10 working days after approving an application. Five years ago the process could take as long as 12 weeks, MoneyExpert.com says.