Following today's Bank of England base rate rise to 5.5% from 5.25% - savers will be expecting to reap the rewards. But a question mark remains as to how long will they have to wait before the increase is passed onto them.
Banks and building societies have historically delayed passing on the rate increase to customers, enabling them to make millions of pounds. Some institutions will not pass on the rate at all, hoping customers will not notice.
Industry experts have suggested that savers might have to wait until June before they start to earn more on their cash.
Kevin Mountford, head of savings and current accounts at moneysupermarket.com remarked 'It takes providers an average of 20 days to pass on an interest rate rise. With each half per cent rise bringing in £12m per day in interest it's easy to see why providers delay,'. He feels 'if the reason for the average 20-day delay is operational then banks and building societies should backdate the rise.'
Icelandic online bank, Icesave was one the first to react to the announced increase. It will pass on the full 0.25% from May 18th, raising its rate from 5.65% to 5.9%. Sainsbury's Bank will offer 5.75% AER from May 17th.
When Dutch bank ING Direct entered the UK savings market a couple of years ago, it was seen as a pioneer by offering market leading rates. However, since then it has fallen from grace with most of its one million customers seeing no benefit from the rate rises in November and January. In fact in April this year, it reduced the rate paid on its Web Saver internet account from 5.51% gross (5.65% AER) to 5.37% gross (5.5% AER).