Written by: Paloma Kubiak
The governor of the Bank of England has given his biggest indication yet that the Base Rate will increase in the very near future.
Speaking to the BBC today, Mark Carney, 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.”
While the news is good for beleaguered savers, independent savings advice site, Savings Champion said they should shop around now to improve rates on money as even if rates rise, providers may not increase their rates as much as hoped.
Its research found that 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%.
For existing customers in closed accounts, the situation has been even worse. The average rate of closed easy access accounts in December 2012 was 1.03% – today it is just 0.38%.
Anna Bowes, director at Savings Champion, said: “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 really make a difference.”
However, Bowes added that as high street banks have cut rates to the bone and savers are waiting patiently for positive things to happen, the best way to minimise the pain is to shop around and move cash to better paying providers.
She said: “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 1.25% gross – five times that of a Base Rate rise of 0.25%.”