The Bank of England’s base rate fell to an all-time low of 0.1% at the very start of the COVID-19 pandemic, but it was announced last week that the base hike would drop to 0.25 %. On the BBC Money Box podcast, Anna Bowes Savings Champion Co-Founder explained what the 0.15% increase could mean for savers.
She said: “We have already seen savings rates rise in anticipation of a base rate hike.
“The bottom line is that we’ve seen hikes, but not all banks will increase rates on existing savings accounts.
“In fact, the last time there was a rare base hike, only 32% of variable rate savings accounts grew by less than half.
“Previously, when the base rate went up, we only saw 50% of accounts go up.
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“The answer is sometimes there will be rate increases and sometimes there won’t be.
“The bottom line is that if you already have a savings account, you have to take a look at what your bank will do for you and take it from there.”
When the base rate is cute, banks are usually quick to lower their interest rates, but when the base rate goes up, many argue that it takes a while for interest to rise.
Ms Bowes continued: “Maybe things will change in the future, but I’m not holding my breath on this.”
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With inflation above five percent, many people will see their money lose value over time because savings rates cannot beat that percentage.
However, presenter Paul Lewis did mention that he had seen savings accounts with tempting offers for five percent.
Ms Bowes explained that these offers come from regular savings accounts and are usually set for 12 months or a certain length of time.
She explained that within 12 months there is normally a maximum amount that can be paid into the account.
She said: “The one you are talking about has a maximum of £ 250 plus you have to be an existing customer of this provider which is Cambridge Building Society.
“Now [savings in] this company under construction [account] will earn five percent because it will be deposited for 12 months, but the next payment you make will only be deposited for 11 months and so on.
“While you’re going to get five percent, it will only be for a short time, so it’s not quite that much.
“But if you save regularly you can’t do better than that, so I’m not hitting it. “
Rachel Springall, finance expert at Moneyfacts.co.uk, also commented on the base rate hike.
She suggested that savers “act quickly” to take advantage of the offers available.
Large banks may not match the base rate for easy access accounts, so it was suggested to look to alternative accounts or banks.
She said: “Savers with their money in a flexible account may have noticed that this has been a very volatile year of interest rate changes outside of any base rate change.”
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