Bank of England cuts interest rate: What does this mean for your savings?

The Bank of England released a coronavirus bill today. The purpose of it is to enable to the government to respond to an emergency situation and manage the effects of a covid-19 pandemic.

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The bill itself contains a lot of information but the Bank of England detail that it has five core supportive aims.

These include increasing the available health and social care workforce, easing the burden on frontline staff, containing and slowing the virus, managing the deceased with respect and dignity and supporting people.

One of the most dramatic declarations however is the announcement of a further cut to the banks interest rate.

The monetary policy committee voted unanimously to reduce the bank’s base rate by 15 points to 0.1 percent.

This is a reduction from the already low figure of 0.25 percent, which was the lowest rate put forward in 200 years.

This will have a knock on affect for people across the UK as regular banks tend to follow what the Bank of England declares.

Current and savings accounts across the country will now likely have their interest rates lowered, meaning savers will see lower returns on their cash for the foreseeable future.

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It is possible that further changes to interest rates could occur before the current month ends. The next regularly scheduled MPC meeting will occur on 25 March, where further emergency measures could be announced.

Cuts like this are made to get the economy moving in difficult times but some experts within the field question if it goes far enough.

As Jeremy Thomson Cook, the Chief Economist for Equals commented: “Another day, another rate cut by the Bank of England.

“The base rate is now at the lowest level we think the Bank of England is prepared to go to and with that will come a not so unsubtle hand-off of the stimulus baton to the Treasury.

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“Lower rates and additional quantitative easing can keep markets satisfied and borrowing costs for both businesses and the government down but unless money is forced into the hands of small businesses soon, then it will be for nothing; they are the ones laying off staff due to a liquidity shock.”

Some feel that the rate cuts will barely have an impact at all, as Alex Maddox, the Capital Markets Director for Kensington Mortgages detailed: “The Bank of England is taking out the big guns. The rate cut is mostly just a signal – trimming another 15bp to 0.10 percent will have a negligible impact, as rates are already so low.

“What will make a big difference are the two other measures announced by the bank – a massive 45 percent increase in the quantitative easing programme to £645bn, and even more money to the funding schemes that can get cash to consumers and small businesses.”

Regardless of what experts predict, the average consumer will likely only be concerned with what this will mean for their cash.

Generally, it is advisable to shop around for the best interest rates available for regular bank accounts.

Money Saving Expert Martin Lewis regularly advises people to move their cash around to take advantage of better offers.

When talking on this topic on a recent Good Morning Britain episode, Martin highlighted the importance of getting in accounts with high rates quickly before they introduce changes. He detailed that the window for action could be extremely limited.

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