The research, conducted by the Universities of East Anglia and Leeds, working in conjunction with Moneyfacts
.co.uk, revealed many banks and building societies priced their financial products at 0.99 per cent, rather than rounding up the figure.
Dr. John Ashton, of the ERSC Centre for Competition policy at the University of East Anglia, said consumers were being fooled into thinking a product was cheaper than it actually is. “It’s the same practice that supermarkets apply when they offer a product at £1.99 instead of £2. Many of us will – consciously or not – round that figure down and think we are getting something cheaper.”
Dr. Robert Hudson, of Leeds University Business School, added: “Perhaps the most surprising and worrying aspect of our research has been the setting of interest rates in a manner which takes advantage of those with the least to invest. It is clear that ‘clustered pricing effects’ occur most for smaller savers, and those with the most to lose from this practice.”
The research indicated that banks and building societies maximised their profits from mortgages by setting interest rates marginally below the whole number. It added that over three-quarters of the firms examined that provided deposits set their interest rates ‘in a manner consistent with maximising profits from customers who tend to round figures up or down.’
