Nationwide is defying the Bank of England to protect its savers
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Nationwide said in its interim management statement that it would pass on the 0.25% interest rate cut to those in debt - mainly those with mortgages - but it held off on applying that cut to savings accounts.
Both those in debt will be paying less each month while savers will continue to earn the same level of return they did before the rate cut was announced.
A building society is a financial institution which is owned by its members as a mutual organisation, and primarily focuses on retail banking, savings, and mortgages.
Joe Garner, Nationwide Chief Executive, said in a statement:
"As the world's largest building society, we are in the fortunate position to be able to take a long term view and focus on providing great service, security and stability for our members. This will be particularly important in a time of increased uncertainty and market volatility following the EU referendum.
"The contribution that our Society continues to make in support of the housing market and by offering long term value to savers, even in the current low interest rate environment, is evident in our trading results for the first quarter which represent a strong start to the year.
"Following the decision by the Bank of England to cut the Bank Rate to 0.25%, the Society will pass on the decrease in full to existing Base Mortgage Rate (BMR), Standard Mortgage Rate (SMR) and tracker mortgage customers. In addition we will protect members who save regularly and who are building up a deposit to buy their first home; as a result, the Flexclusive Regular Saver at 5%, the FlexOne Regular Saver at 3.5% and the Help to Buy ISA at 2% are being maintained at their current rates."
The pound has sunk to 30-year lows, UK government bonds (gilts) traded in negative territory on Wednesday, and Bank of England has cut interest rates to a record low of 0.25%. This is after keeping rates at 0.5% since March 2009.
Low interest rates are great for people in debt - it keeps the cost of borrowing cheap.
The rate cut, as well as the BOE's £70 billion asset purchase programme, is part of the central bank's stimulus programme. Low rates are meant to stimulate the economy as the make it cheaper to pay back debt, including mortgages, and keep people spending.
But for savers, this is terrible. This is because it means you make very little on fixed income investments, such as bonds. Institutional investors are already being burned - government bond yields have fallen, and some tenures dropped into negative territory this week.
However, since Nationwide said retail savings accounts will not change in terms of rates of returns, then it looks like the every day person on the street will be shielded from this fallout for a while.
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