Finally!! As widely predicted - and at long last - the Bank of England has today raised the base rate from 0.50% to 0.75%. The highest it has been in almost a decade.
Many savers will breathe a sigh of relief; it’s been a long time coming and something that savers so desperately need. At least that’s what you might think.
But, without wanting to put too much of a dampener on it, savings rates are unlikely to change immediately and we’ll have to wait and see if the full rise is extended to all variable rate accounts – which is unlikely, judging by the previous behaviour of the banks and building societies.
Following the last increase from 0.25% to 0.50% back in November 2017, on average, easy access interest rates have risen by just 0.09%, compared to the 0.25% rise. Many banks and building societies didn’t raise rates on some accounts at all, demonstrating how loosely the movement in the base rate is tracked by providers these days.
So, savers cannot afford to be complacent.
This is especially true if you have money languishing with a high street bank, as these providers are paying some of the worst rates on the market.
With some currently paying as little as 0.05%, we suspect that these appalling high street accounts will see little change in the rates paid following the 0.25% boost today in the base rate.
Even in the very unlikely event that the rates on these high street accounts were to increase by 0.25%, you are still likely to be getting a very raw deal as the current best buy easy access accounts already pay considerably more.
The good news is that best buy rates across the board have been steadily increasing over the last couple of years, with many hitting a two-year high. In fact, the best easy access rates have increased by up to 12% this year alone. But the competition that is driving up best buy savings rates is mainly between the plethora of newer providers competing for savers’ funds.
So, don’t rely solely on the base rate rise to improve the pounds in your pocket. If you have money sitting in a poor-paying account, act now to improve your interest.
For example, if you have £50,000 in the HSBC Flexible Saver currently paying 0.05%, over 12 months you would earn a pathetic £25. Even if HSBC passed on the full rate rise (highly unlikely since the last time the rate was increased by just 0.04%!) at 0.30% you would earn £150 per year.
However, the current best easy access account is paying 1.40%, so your £50,000 would earn a far healthier £700 per year.
And if you didn’t need access to the money, you could earn even more. Wyelands Bank has launched a 1 Year Fixed Rate Bond paying 2.15%* - on £50,000 that would mean gross interest of £1,075 over the term.
Now that’s far better than £25!!
*We are occasionally paid by some providers if you click through from our Best Buy Tables and open a savings or current account with them. We will never accept a payment that compromises in any way our independent, whole of market approach to providing information on savings products. For clarity we will indicate those companies who remunerate us with an asterisk (*).
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