HIGH street banks treated their customers to a double whammy over the festive season: rates on savings accounts were slashed for the second time in as many months, while mortgage rates have not come down as much as expected.

Big names such as Abbey, Halifax and NatWest all slipped out details of the savings changes during the break.

Rates were chopped by up to 0.4 percentage points, even though the Bank of England cut interest rates by only a quarter point in December.

Many of the banks had already reduced rates ahead of December’s move, meaning some savers have suffered cumulative cuts of 0.59 points since autumn – more than double the fall in Bank rate.

Sue Hannums of adviser AWD Chase de Vere said: “The huge interest-rate cuts with which many providers have hit savers in recent months is truly shocking. If your provider has hit you hard with an over-the-top reduction, it is time to look elsewhere.”

Meanwhile, the latest credit conditions survey from the Bank of England revealed that the long-expected mortgage squeeze is hitting home, with lenders raising their mark-ups on new products and increasing the deposit borrowers must put down before they can get a mortgage.

Brokers said fixed rates for new borrowers are about 0.5 percentage points higher than they would expect, given they should be coming down along with the City’s expectations of future interest rates.

With about 1.2m people due to remortgage off cheap fixed rates in 2008, the higher margin on fixed rates could cost someone with a £200,000 mortgage an extra £1,000 in interest over a year.

We look at the latest rate moves and tell savers and borrowers what they can do about it.

Savings

Halifax is one of the worst offenders, with some customers suffering cuts of nearly 0.6 percentage points even though Bank rate came down only 0.25 points to 5.5% last month.

Rates on its Saver Reward, for example, were cut by 0.19 points in November and then again by a hefty 0.4 points from January 1 – a total of 0.59 points.

Savers in its Web Saver account have also been hammered with a cut of up to 0.4 points since November. The rate if you don’t have a cashcard has fallen from 5.5% to 5.1% on balances above £25,000.

Halifax argued it had launched Halifax Web Saver Extra, which pays a healthy 6% – although this too was cut from 6.25% at the start of the week. Web Saver Extra also has strings attached. It allows one penalty-free withdrawal a year, but any more will cost 30 days’ interest.

NatWest also announced early last week that rates would be slashed by up to 0.35 points, even though it had already cut rates just a month earlier. Rates on its 90-day Bonus Reserve account, for example, were cut by 0.2 points in December and then again by 0.35 points this week.

Savers who want to ditch poor-perform-ing accounts are being urged to act fast. There are still some great fixed-rate accounts available paying nearly 7%, but they are unlikely to be around for long as the Bank of England is expected to cut rates further this year.

Chelsea building society has just launched a one-year bond paying 6.90% on a minimum investment of £1,000.

London Scottish bank is second in some best-buy tables with a bond paying 6.85% on £2,000. However, last week it became the first London-listed bank to admit it had been ordered by the Financial Services Authority to make up a £13m shortfall under new rules on capital. Advisers suggest you put no more than £35,000 – the amount guaranteed if a firm goes under – in its schemes.

Mortgages

While fixed rates have not come down as much as expected, brokers still predict falls over the next few weeks, so it may be worth waiting. If you need a mortgage now, you could take a penalty-free tracker and then switch at a later date.

Ray Boulger of broker Charcol suggests a tracker from Nationwide at 0.02 points below Bank rate or 5.48%.

The best tracker if you do not want to switch into a fix at a later date is from Lloyds TSB at 0.62 points off Bank Rate, or 4.88%, although the fee is 2.5%.

A more rounded deal is Coop’s 5.49%, a discount of 0.01 from Bank rate for two years. The fee is £999 and it comes with free valuation and legals on remortgages.

SAVER VOTES WITH HIS FEET

DANIEL PRICE, 27, a sales manager from Flint in North Wales, was shocked to discover recently that the rate on his Barclays Esavings account has been cut twice since autumn, even though the Bank of England has cut rates only once, in December.

Price, pictured with girlfriend Anne Marie, said: ‘It’s always the same. Changes like this are buried in the small print of the terms and conditions, which no-one reads, so banks get away with it.

‘They never give savers the full benefit when rates are rising, so why should I be punished now rates are coming down?’

Price has therefore moved all his money into his Barclays Isa, on which he is earning 6.75% under a deal he got last April.

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