A savings expert cautions that UK bank account users must act prior to August 1 to receive high interest rates on their investments.
Expert Insights on High Savings Rates Ahead of Thursday's Base Rate Announcement
Ahead of Thursday's base rate announcement, money.co.uk savings accounts specialist Lucinda O'Brien shares her ideas on what can happen and how you should manage your money accordingly, as reported by the Birmingham Live.
O’Brien states: “Interest rates on savings accounts have been consistently high this year, as the base rate remained at 5.25%. The base rate has been stuck at this point since August 2023, after we saw consecutive rises from December 2021. Staggeringly, the last cut in the base rate was in March 2020.
Impact of Base Rate Decisions on Savings and Mortgages
The recent rise in stability is encouraging for savers, with providers offering rates over 5% well above the current inflation rate of 2%.
However, the increase in the base rate has led to higher mortgage rates, creating difficulties for homeowners. Thus, a decrease in the base rate would be highly beneficial from this viewpoint.
Ms O'brien went further to say: “But for savers, it’s now an anxious wait ahead of the next Bank of England meeting on Thursday. Predictions are 50/50 that the monetary policy committee will vote in favour of dropping the base rate from 5.25% to 5%. Previously, it was expected the base rate would be unchanged in August, and instead things would shift at the next meeting in September.
“But the tide appears to be turning, as forecasters are now saying there could be a case for a base rate drop as soon as Thursday. Recent figures show inflation held steady at 2% in June, which was the Bank of England’s target. If inflation stays low, then this is a good case to start cutting the base rate, but there are other elements to consider. For example, services inflation (education, hospitality and culture) continues to be high at 5.7% and this could be the sticking point that sways the committee to hold off reducing the base rate.
“So as the decision could go either way on Thursday, it’s best for savers to act now.” She said: Currently, Union Bank of India is offering a one-year fixed-rate account at 5.40% and this can be opened with £1,000. Raisin UK also has a range of competitive interest rates from providers, including GB Bank’s one-year fixed-rate account at 5.26% and Ziraat Bank’s one-year fixed-rate at 5.25%. Both these accounts can be opened online and with a minimum deposit of £1,000.
“Oxbury has an easy access account at 5.04%, but you’ll need to deposit at least £25,000 and keep the balance above this to get the interest paid on a monthly basis. Alternatively, Principality has an easy access account at 5.0% and this can be opened with as little as £1, but bear in mind you can only make three withdrawals every calendar year.”