Credit crunch reveals winners and losers as bank holds rates

Payouts on savings are up a staggering 1.2 percentage points from January 2007 despite the Bank of England base rate being the same now as it was then, according to new research from MoneyExpert.com.

The independent financial comparison website says that the average interest rate on a typical savings account with a balance of £1,000 has increased from 2.67 per cent in January 2007 to 3.87 per cent now.

But while savers are counting their profits, borrowers are counting the cost of the credit crunch as lenders make credit cards and mortgages more expensive.

MoneyExpert.com research shows that the average two-year fixed rate mortgage now costs 0.62 per cent more than it did in January 2007, even though the Bank of England base rate is exactly the same. At the beginning of last year the average initial rate payable on a two-year fixed rate mortgage was 5.55 per cent, and now that figure has risen to 6.17 per cent.

And borrowers have also been hit with credit card rate rises. The average standard rate on purchases has increased from 16.72 per cent in January 2007 to 17.01 per cent now.

Sean Gardner, Chief Executive of MoneyExpert.com, said: “The credit crunch has produced plenty of losers but there are some winners too. Average rates on savings have rocketed as finance firms try to raise cash after the money markets seized up.

“Despite interest rates being the same now as they were in January 2007, banks have shifted their prices considerably over that period. Some products bear no resemblance to those on the market at the beginning of last year even though the cost of borrowing is essentially the same.

“The real losers are customers who are not aware of how the market has changed. If you have a savings account that pays less than the base rate you should take your business elsewhere, and fast. Banks aren’t bothered about showing loyalty to their customers so don’t worry about showing loyalty to yours.”

MoneyExpert.com says that regularly reviewing providers for a range of services is good practice but warns consumers that it might not always make financial sense to switch.