In an unprecedented move, the Bank of England (BoE) announced on Thursday 19th March to cut the base rate to an historic low of 0.10%. Although we can’t ignore that this is an attempt to stabilise and support the economy in the wake of the coronavirus crisis, this second cut in just over a week is yet another huge blow for savers.
Following the previous cut to the base rate by 0.50% (to 0.25%), fixed rates from many of the best paying providers were immediately withdrawn with new lower rates made available - if at all. Over 60 providers have so far withdrawn over 320 fixed term bonds and cash ISA accounts, many of which were best buys. The average fixed term bond rate fell from 1.24% at the beginning of March, to 1.14% today. Fixed term ISAs have fared better and the average rate is now only marginally less than fixed term bonds - although the best buys still lag behind.
Other best buy rates are being withdrawn as well, however, off-sale accounts have seen little or no change as yet. Those cuts are undoubtedly around the corner with changes generally happening at the start of the following month, following any BoE announcement.
Savers who are keen to lock in some money into a fixed rate to try and weather the storm should consider opening an account as soon as possible. This new but highly anticipated cut by the BoE is a huge blow to savers, bringing the base rate to a record low level.
There’s no doubt that we may see a flight to safety in the current climate, with more people hoarding cash that was earmarked to spend elsewhere. If you are building a new nest egg or have existing money in cash then it’s wise, even in this low interest rate environment, to make that money work as hard as it can. What we hope is that in the current situation, NS&I could be mobilised to help the Government raise money to support the economy and help beleaguered savers.
During the First World War, an increased need for the Government to borrow money saw the launch of War Savings Certificates in 1916 and National War Bonds in 1917. The former cost 15s and 6d each and became worth £1 within five years. The latter payed 5% interest.
The amount raised during the First World War was almost £433m (around £30 billion based on 2019 values).
Similarly, the Savings Bank ran a nationwide campaign to help fund the Second World War, including a new issue of National Savings Certificates and the introduction of new Defence Bonds. Deposits into National Savings rose from £509m to £1,982m between 1939 and 1946.
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