With CPI inflation remaining stubbornly at 3%, many economists are predicting that the Bank of England base rate will increase as soon as May this year. Good news for savers!
But while this would be a really welcome move and should help savers, you still need to be vigilant, as the providers may not increase rates by as much as hoped.
Five years ago, when the base rate was at 0.50%, as it is today, the average live easy access account was paying 0.74%. Today, that average rate is just 0.41%. And this is up by just 0.06% since September 2017, even though the base rate has risen by 0.25% in that time.
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 0.44%, up from 0.38% in September 2017.
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 2016. The good news for savers is that the FLS tap was switched off at the end of January and access to the TFS ended this week (28th February), so perhaps providers will start to need funds from savers once more. This, as well as a couple of Bank of England base rate rises, will hopefully make a real difference.
However, although highly unlikely, even if the banks and building societies were to raise the rates on all accounts by 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, whilst 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 over the last year or so and best buys have increased steadily, without a true base rate rise.
If you are unlucky enough to be in one of the rock bottom accounts paying just 0.10% or less, by switching today to the best buy easy access account, you could increase the interest you are earning by at least 1.20% gross – nearly five times that of a base rate rise of 0.25%. Take a look at our table below to see how much better off you could be by switching your savings from your bank.
High Street V Best Buy – Easy Access
* NatWest Instant Saver is a tiered account.
£1 - £24,999 = 0.10%
£25,000 - £999,999 = 0.20%
£1,000,000 + = 0.25%
** Barclays Everyday Saver is a tiered account
£1 - £49,999 = 0.20%
£50,000 + = 0.25%
High Street V Best Buy – 12 Month Fixed Rate Bond
* HSBC Fixed Rate Saver 1 Year Saver is a tiered account
£2,000 - £49,999 = 0.50%
£50,000 + = 0.60%
** NatWest 1 Year Fixed Term Savings account is a tiered account
£5,000 - £49,999 = 0.90%
£50,000 - £500,000 = 0.95%
For more information on the best rates look at our Best Buy Tables or call our savings experts today on 0800 011 9705 and make sure you are getting the best rates in the market.