The Governor of the Bank of England, Mark Carney, has given his biggest indication yet that the Bank of England base rate will increase in the very near future. Good news for savers!
In an interview last week on BBC Radio 4’s Today Programme, he said;
"If the economy continues on the track that it's been on, and all indications are that it is, in the relatively near term we can expect that interest rates would increase somewhat."
"We're talking about just easing a bit off the accelerator to keep with the speed limit of the economy and so interest rate increases when they come - when and if they come - will be to a limited extent and gradual."
But while this would be a really welcome move and should help savers, they still need to be vigilant, as the providers may not increase rates by as much as hoped.
Our figures show that five years ago, when the base rate was 0.50%, the average live easy access account was paying 0.74%. Today that average rate has fallen to 0.35% - a drop of 0.39% when the base rate has only dropped by 0.25%
And for existing customers in closed accounts, the treatment has been even worse.
The average rate of closed easy access accounts in December 2012 was 1.03% - today it is just 0.38%.
This harsh environment for savers was caused, in the main, by the introduction of the Funding for Lending Scheme (FLS) in 2012, further exacerbated by the introduction of the Term Funding Scheme (TFS) and a base rate drop in August last year.
The good news for savers is that both the FLS and TFS are ending at the beginning of 2018, so perhaps providers will start to need funds from savers once more. This, as well as a Bank of England base rate rise, will hopefully make a real difference.
However, even if the banks and building societies were to raise the rates on all accounts at the same level as the rise in the base rate, many savers will still be worse off in comparison to five years ago, especially if they are with a high street bank, many of which have cut their rates to the bone.
So, while we are waiting for these positive things to happen, the best way to minimise the pain is to shop around and move your cash, if you could do better elsewhere.
Competition has been rife so far in 2017 and best buys have increased steadily, without a base rate rise.
If you are unlucky enough to be in one of the rock bottom accounts paying 0.01%, by switching today to the best buy easy access account, you could increase the interest you are earning by 1.26% gross - 5 times that of a base rate rise of 0.25%.