🔔 Soaring inflation forces the MPC into action yet again

The Bank of England’s Monetary Policy Committee (MPC) has had its latest base rate meeting (17th March 2022) and as was highly anticipated, the base rate has been increased for the third time in a row – although this is in order to try and temper the soaring rate of inflation, which is hurting us all. But this means that base rate is back to its pre-pandemic level of 0.75%. But what does this actually mean for savers in the face of continued rising inflation?

So far, only 64 of the 158 banks or building societies - or just 40% of the savings market - have announced any changes to some of their savings accounts since the December base rate increase, never mind the one in February. And of those that have made changes, it doesn't mean that all their savings accounts have increased. Only 33% of all existing variable rate savings accounts have increased by something, but shockingly just 2.3% by the full increase in the base rate of 0.40%. 

And the high street banks are certainly not playing fair. While HSBC has increased the rate on it easy access Flexible Saver by just 0.09% to its current rate of 0.10%, Halifax, Lloyds, NatWest, Bank of Scotland and Santander are all still paying an appalling 0.01% AER. These key providers have made virtually no increases at all for their loyal savers.

The good news is that there is a group of providers who want your cash and are prepared to pay for it, but it would be good to see rates back up to the levels they were before the pandemic.

The last time base rate was at 0.75%, from August 2018 to March 2020, best buy easy access rates got to as high as 1.60% AER and fixed rate bonds were even higher – the best 1-year bond was paying as much as 2.15%. Savers desperately need rates to get back to at least these levels.

At the moment Cynergy Bank is offering the top easy access account of 0.84% AER and the best 1-year bond is with Sharia provider Al Rayan Bank, paying 1.71% AER. 

Unfortunately, although improved, these rates are far below the latest inflation figure which was 5.5% for the 12 months to January 2022. And we can all feel that this figure is already higher. The Bank of England's latest prediction was that inflation will reach 8% in the coming months, but it could be even higher later in the year. With inflation at 8%, your cash would halve in value in real terms after around nine years, especially if you are earning just 0.01%. This is because the price of the products and services we need to buy are increasing by more than the interest our cash is earning. Try our Inflation Calculator to see how inflation could be destroying your wealth and how switching to a better account can help, even though it can’t currently eliminate the problem.

With another MPC announcement taking the base rate back up to 0.75%, it’s time for the providers to stop pussyfooting around. Savers have suffered for long enough. It's a disgrace that they are being ignored at a time when they need all they help they can get to fight against rising inflation. But, unless savers act and move their money from the providers who refuse to play fair, the situation won’t improve anytime soon, as by hoarding cash in accounts paying as little as 0.01%, this is playing into the unscrupulous banks' hands.