In a disappointing move, the Bank of England (BoE) has today decided to cut rates for the first time since 2009, as there is now a clear need for the bank to act to stimulate the economy.
But the BoE did not just cut rates, it has also launched a Term Funding Scheme, which has many similarities to the Funding for Lending Scheme (FLS) launched back in August 2012, offering cheap money to the banks and building societies to lend. The FLS had a dramatic effect on the rates paid to savers and caused a change in provider habits to cutting savers rates.
It's clear that savers need more support than ever, especially those such as pensioners, who rely on their savings to boost their income and we’re here to help!
Whenever the BoE Monetary Policy Committee meets there is a collective holding of breath from savers who have struggled for many years now to get a decent return on their cash savings. Yet it appears there has been little correlation between the base rate and the amounts that savers are being paid by the banks and building societies.
The recent publication of the Financial Conduct Authority’s ‘Sunlight Remedy Tables’ – so called because it believes that shining a light on poor payers will help to improve the lot of savers – shows just how bad the situation has become for some savers in poor paying accounts.
For example, Post Office has one easy access cash savings account that can be managed in branch, which is not paying a single penny in interest, according to the FCA’s tables. Only just ahead are Ulster Bank and Danske Bank which are paying a paltry 0.01% on one account each, and HSBC and National Counties Building Society, which are paying 0.05%.
While these are the lowest the FCA identified out there, plenty of providers are still offering derisory rates of just 0.1% on their accounts, including the likes of Bank of Scotland, Clydesdale Bank, Santander, Principality Building Society, Cambridge Building Society, and Yorkshire Bank.
However, there is no reason to stick with such low rates, as there are some accounts out there that could pay you as much as 100 times more interest right now, than those sitting in the worst accounts are being paid.
You can get significantly higher rates on the High Interest Current Accounts from Nationwide, TSB Bank and Santander, although the amount you can deposit is smaller. For example, you can get 4.89% gross (5% AER) from Nationwide’s FlexDirect Current Account on deposits up to £2,500 and on the TSB Bank Classic Plus Account, up to £2,000. This is 100 times more than you are paid in the HSBC and First Direct accounts paying 0.05%. Santander's 123 Current Account currently pays 3% AER on balances between £3,000 and £20,000, however this comes with a £5 monthly fee. All these rates are variable, so are subject to change.
If you want to be sure you are getting a better rate for a longer period, you can lock into a fixed term to shelter your savings for a period of time, although the best rates have been disappearing in recent weeks.
Some of the top-paying fixed rates still offer more than 30 times the interest available on the worst payers out there. For example, Paragon Bank has a fixed-term account for 2 Years, which is currently paying 1.80% for two years – this is 36 times the interest paid on a worst paying 0.05% savings account.
So, whether you are fearing the worst after the Bank of England has cut rates you can take action now to boost your savings right now by calling 0800 321 3581 or signing up to our free Rate Tracker. For those with savings of more than £100,000, why not take a look at our Concierge Service to improve returns whilst keeping your money fully protected under the Financial Services Compensation Scheme.
🔔 Bank of England cuts interest rates to 0.25%
04th August 2016
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