Loyal savers were punished with a slew of interest-rate cuts last week as banks and building societies seized on last month's Bank rate cut to squeeze their customers.

Banks are offering their best ever rates to new savers as part of a strategy to improve their cash reserves during the credit crunch. However, as savings rates on new fixed-term accounts now top 7%, existing customers are quietly being hit. Bank rate was cut by 0.25 percentage points to 5% in April.

HSBC, which is offering low interest-rate deals for remortgages as it strives to improve its share of the mortgage market, cut its instant access Flexisaver accounts by up to 0.45 points.

First Direct, also owned by HSBC, targeted instant-access account holders with balances of £5,000 to £50,000 with a cut of 0.44 points. First Direct's Savings Account now pays 3.25%.

Government-owned Northern Rock also reduced rates by more than the quarter-point Bank rate cut. It slashed its Instant Access by 0.35 points to a miserly 0.5% on balances of less than £25,000.

Meera Patel of Hargreaves Lansdown, an adviser, said: “This is an opportunistic move - HSBC is offering rock-bottom home loans to attract new borrowers at the expense of existing customers. Those who have been punished in this way should switch to a better-paying account immediately.”

Halifax and Abbey passed on 0.25-point reductions to most customers, as did Nationwide, but other building-society customers were not as fortunate.

Yorkshire, West Bromwich, Principality and Chelsea cut some accounts by up to 0.35 points while Norwich & Peterborough, Leeds and Cumberland cut rates by 0.30 points. Yorkshire now pays 3.65% on its Access Saver account.

Private banking clients were not immune. Coutts, the private bank, cut rates in March by up to 0.44 percentage points. It raided savers again last month, cutting its Private Reserve Account by 0.55 points for those with £50,000 balances with effect from last month.

Michelle Slade of data firm Moneyfacts said: “Private bank customers are likely to have large amounts in their accounts and a cut of up to 0.55% will make a big difference in the amount of interest they receive. A customer with £500,000 stands to lose £2,593 over the year.”

Investors have pulled millions out of equities and deposited large sums into cash accounts in an attempt to ride out turmoil in the stock market. However, not all providers have played fair.

Some banks are shortchanging savers by slashing their best deals with no warning. One Sunday Times reader was caught out when Lloyds TSB suddenly pulled its market-leading cash Isa at 6.5% last month.

The rate, which was the highest available for those looking to transfer their Isa balances, has fallen to 5% for new savers - £135 less a year on a £9,000 balance.

Barclays still offers 6.5% on new transfers, but it is experiencing heavy administrative delays.

Robert Harris, aged 63, a Barclays customer for more than two decades, from Shotesham, Norfolk, applied for a Tax Haven Isa with a request to transfer £3,600 from his existing Barclays account. A week after he submitted the application he was told he would have to wait up to a month.

He said: “I don't see why I should have to lose interest because I am already a Barclays customer. I would have preferred if they told customers about these delays when I applied.” While existing customers suffer, the war to attract new deposits is intensifying.

Last week, Icesave, the Icelandic bank, launched an account paying 7.01% fixed for a year on a minimum balance of £1,000. A week earlier, ICICI, the Indian bank, launched an account paying 7% on a minimum £1.

Bradford & Bingley last week launched a new one-year bond paying 6.60% on a minimum deposit of £1,000 - it has issued 24 new bonds since the start of the crunch in August, according to Moneyfacts. Abbey joined the battle with a one-year fixed-rate bond paying 6.55% on deposits above £30,000.

Savers who prefer to lock their savings away for shorter periods can invest in a new account from Cahoot, which is owned by Abbey. Last week it launched a six-month bond paying 6.55% on deposits over £30,000. Birmingham Midshires pays 6.87% on its six-month internet bond on a minimum deposit of £1.

Advisers have urged savers to limit investments to £35,000 - the maximum available under the UK financial services compensation scheme.

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