As expected, last weekend’s press was dominated by the base rate rise news. Of course, everyone is warning that, although base rate has increased by 0.25%, you shouldn’t automatically expect to see your savings account rate being raised by the same amount.
As we’ve pointed out to many journalists, following the last base rate rise only 50% of variable rate savings accounts saw an increase to the rate they are paying. And I’m afraid that, although this is the first true base rate rise for almost a decade, we all need to be realistic and expect more of the same.
Even if savers are to see a increase to the rate they are earning, there might be a delay. As our very own Tom Adams said in The Times, “while savers will be extremely pleased by the rise in the base rate, changes won’t happen immediately. Based on previous changes, we would expect to see increases start to apply to savings accounts from the end of August or, more likely, the start of September.”
So, while some will rejoice at the news, it’s important to remember that even if your provider passes on some or all of the base rate hike, you may still be getting a raw deal.
The Financial Times pointed out that in March 2009. when the base rate first dropped down to 0.50%, the average easy access account rate stood at 1.19% - today that average is just 0.47% - although remember that best buy accounts are paying considerably more!
As The Mail on Sunday surmises, as the prime purpose of building societies is to act in the best interest of their customers, we’d hope to see them all increasing rates on all variable rate accounts by 0.25% - but that’s unlikely to be the case. In fact, even in these early days, we can already see that it’s a mixed bag. Take a look at our article – is your savings provider playing fair.
The Times summarises the general state of affairs that we will probably see unfolding over the next couple of weeks, that although with a base rate rise there should be winners (savers) to counteract the losers (borrowers), the only winners are really the banks. For example, they reported that Barclays Bank announced a rate rise to its mortgages almost immediately, while we are still waiting to see what they are going to offer to savers. Susan Hannums summed it up in The Sunday Times. She said, “You can bet your bottom dollar that debt costs will go up while savings providers only loosely track movements in the base rate”.
And we are still waiting to hear about what NS&I will decide to do. After announcing recently that they will be cutting the rate on the Direct ISA from September, I won’t be holding out much hope for any decent rate increases from them. But as ever, we’ll have to wait and see.
In other news, The Financial Times and The Sunday Express both covered stories around the rise in Inheritance Tax receipts collected by HM Revenue and Customs. The figure now stands at a whopping £5.2bn in 2017/18, up 8% on the previous tax year. Property prices are blamed in the main for the huge increases in collected revenues, which just goes to highlight the need for financial planning so more of your money is going to loved ones and not to the taxman.
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