Our tip; don’t wait, act!
Another week, another conflicting opinion on the next move by the Bank of England on interest rates. It’s frustrating and confusing but one thing seems to be clear, no one really knows when rates will move. The members of the Monetary Policy Committee continue to disagree on what the next move should be, let alone when it should happen.
Recent comments from the BOE Chief Economist Andy Haldane stated that due to evidence of slowdown and risks from China, he believed the next move in rates could even be downwards. This was in stark contrast to the Governor of the Bank of England, Mark Carney, who said he thought the debate on when to raise interest rates will become clearer around the turn of the year. Of course all of these comments are based on varying economic factors and both could be wrong in their predictions. So at what point do you block out the noise and act to get the best rates on your savings? Well, now.
As Mark Carney has stated, the best indication of when interest rates will rise is when interest rates rise! Sitting it out in variable rate accounts or even shorter term fixed rate bonds waiting for better rates to come, can mean missing out on all important interest in the meantime. And let’s not forget that whilst the base rate has remained at its historic low of 0.50% for over 6 years, thousands of existing savings rates have fallen and continue to fall, in the last 3 years alone.
Bank of England figures released this week show that rates on deposits (including ISAs) are at record low levels. Considering that rates on existing accounts are still being cut, it’s little surprise.
Currently half of all easy access accounts now pay 0.50% or less *. A shocking figure, yet one that comes up regularly as many savers we speak to still hold money in these poor paying accounts, in many cases substantial sums. When you compare this to the rates you can get in high interest paying current accounts, up to 5% with TSB and Nationwide, its little wonder these accounts have proved popular with savers. They are one of the best alternatives in the current climate and opening multiple accounts can mean saving a sizable lump sum, albeit with a little work. If you’d like to know more about opening multiple current accounts to get the best interest, why not speak to one of our savings advisers on 0800 321 3581.
Back to the base rate. With the connection between base rate and savings rates so far removed these days there’s no guarantee what impact, if any, a base rate move will have on your savings rates. But it’s not all doom and gloom. The continued rise of the challenger banks, bringing much need competition and boosting rates for new savers, means that best buy rates are on the up.
So in this respect, the tide for savers appears to have turned and with more new savings providers waiting in the wings to launch in the coming months, we hope this rise in competition and rates will continue.
With many better rates available now, why wait. Our simple strategy of a balanced savings portfolio means you can access the best rates now, whilst keeping money available in accounts that can take advantage of better rates when they become available. Smaller balances may still be better off in high interest paying current accounts, but for those with larger lump sums, a mix of current accounts, short and longer term fixed rates means that you always have some money in the very best rates available, right now.
Learn more about how to balance your savings by calling 0800 321 3581.
Notes: * figures based on all live and closed to new business easy access savings accounts assuming a balance of at least £5,000.