Halifax Building Society interest rates

Halifax's Houdini: A cruel trick that makes your fixed-rate savings interest vanish!

Now you see it: Rates for Halifax's fixed deals have been magically changing during the sign-up processHalifax bank is running a mean rate-cut ruse that is luring savers into poor-paying fixed deals.

Customers whose bonds and cash Isas are coming to the end of their term have told how they are having their savings put into accounts that pay much less than they were promised. In some recent instances, the interest they get is 25 per cent less.

Once they discover they’ve been trapped, savers have just a few days to move their cash without incurring a penalty, which could strip them of as much as one year’s interest.

This cruel practice goes against the spirit of Money Mail’s Get Britain Saving Campaign, which wants banks and building societies to offer clear, simple accounts.

Halifax’s rate ruse works like this. About a month before the end of a bond term, it contacts savers and offers a series of accounts that money can be reinvested in. In one recent case, the rate quoted was 3 per cent.

Customers send back forms to accept the deal. It is only when they receive a certificate confirming the investment that they discover, in some instances, that they are getting a worse rate than they thought.

This happens when Halifax lowers its advertised rates between sending the initial forms out and reinvesting the money. So, in a recent example, someone who had accepted the 3 per cent offer actually ended up earning 2.25 per cent.

Smallprint in the original paperwork allows Halifax to simply move the cash into the lower-rate account without notifying the customer.

One Money Mail reader from Chatham in Kent was told in April that when her one-year bond matured on May 16, she could move to another one paying 1.75 per cent before tax.

But when the account was set up, she found she was getting just 1.6 per cent. The rate had been cut on May 8, but Halifax had not informed her.

She says: ‘No other bank I have dealt with does this. What they quote, in my experience, is what you get, provided you reinvest in the time limit given.’ David Rowlands, from Gwynedd, Wales, received a letter from Halifax on April 12 about what would happen when his three-year Fixed Rate Isa matured on May 3. He was offered the same deal again, but at 3 per cent.

He returned the paperwork on April 24 — but when the Isa certificate arrived, he saw he was getting 2.25 per cent.

Mr Rowlands says: ‘It’s disingenuous to market a rate that is not necessary going to be there, especially at a time when interest rates are falling.’

In its two-page letter to customers, Halifax does specify that rates can change and that the ones stated are not guaranteed.

But this is far less prominent than the advertised rates.

Once the money is reinvested, customers have 14 days to get out of the new deal. In reality, though, Halifax savers get a far shorter window than this, as the certificate of investment that reveals the lower rate is only sent out by second-class post within seven days of the account being opened.

If you miss the deadline, you face stiff penalties to exit the deal. On a one-year bond, you lose the equivalent of 90 days’ interest. At the current 1.75 per cent on its one-year fixed-rate Isa, that’s nearly £44 on a £10, 000 investment — with the penalty deducted from your capital.

The charge rises with the length of the bond or Isa. On three-year deals, the interest penalty is nine months, and it’s a whopping one year on a five-year bond or cash Isa. That’s £235 on a £10, 000 fixed-rate cash Isa.

Other banks and building societies have a much fairer practice. Nationwide automatically gives you the better deal if rates change and National Savings & Investment guarantees what it originally offered you.

A spokesman for Halifax says: ‘We do understand customers’ frustration with this situation where the rate changes.’ The bank says it has looked at issuing letters without rates, or quoting a minimum rate.

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