Savings rates have been on a downward spiral for years, not least since the Bank of England base rate hit 0.50% over 5 years ago, but also following the introduction of the Funding for Lending scheme in 2012. The continual drop in best buy rates painted a bleak picture and it seemed never-ending.
But are things improving? Rates on the best easy access accounts have plateaued at an average of 1.40% for some months before turning a corner in May and actually increasing slightly to 1.44% *. Added to that there is encouraging news with some competition in the fixed rate bond market that is driving rates upwards. At this point, it’s really only the challenger banks driving the competition, the likes of Shawbrook Bank, Close Brothers, Vanquis and Aldermore. That said, if best buy rates have stopped falling and fixed rates are on rise, can we hope that the tide may be starting to turn?
Recent comments from the Governor of the Bank of England suggest that the Bank of England Base Rate may be on the rise sooner than markets predicted, which could mean a rise before the end of this year.
Savers have really suffered in recent years with record low rates of interest, but we can't just wait on the Bank of England to raise interest rates to boost savers' returns. There has been little correlation between savings rates and the base rate in recent years so it is unlikely that all providers will pass on the full benefit, when it comes, to all savers.
What we desperately need is competition in the market. Many savings providers still seem awash with cash, showing little or no desire to pull in new savers by offering competitive rates, that's why it's refreshing to see the challenger banks leading the way. With more competition and rising interest rates, can we hope to see a brighter picture for savers?
*Average of the SavingsChampion.co.uk best buy easy access accounts
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