Savings providers pulled both ways as HBOS removes bonds

Commenting on HBOS' move to pull bonds provided through the Birmingham Midshires, AA and SAGA brands, Kevin Mountford, head of banking at moneysupermarket.com, said: "Whilst HBOS pulled its products before today's rate cut, this move surely heralds a change in the winds of fixed rate savings. For a while now savings rates have remained decoupled from the Bank of England base rate, but today's emergency rate cut is likely to trigger other providers begin to pull their top deals. In short, this action by HBOS might be the start of something much bigger.

"Recently savings deals have followed LIBOR more closely than the base rate, and it will be interesting to see what happens with the LIBOR rate tomorrow and in particular how savings providers will react.

"Despite HBOS' move, many of these banks still see retail savings deposits as critical as they can inject much needed liquidity into their businesses. As such, some banks may feel forced to remain competitive, and we have already seen Coventry Building Society announcing it will hold the rates on its eSaver account. It will be interesting to see who decides to focus on the base rate and who is keeping their eye on the best buy tables. My advice to customers would be to lock in to a top fixed rate deal now, before the rates tumble."