‘You can’t do much better’ Savers urged to consider 5 percent savings account
Martin Lewis says there is a 'sliver of hope' for savers
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The Bank of England Base Rate dropped to a historic low of 0.1 percent at the very start of the COVID-19 pandemic however it was announced last week that the base rase will rise to 0.25 percent. On the BBC Money Box podcast, Anna Bowes Savings Champion Co-Founder spoke about what the 0.15 percent increase could mean for savers.
She said: “We have seen savings rates going up already in anticipation of a base rate rise.
“The key thing is we have seen some rises but not all banks will increase the rates on existing savings accounts.
“In fact, the last time there was a base rare rise, only 32 percent variable rate savings accounts increased so less than half.
“The time before that when the base rate increased, we only saw 50 percent of accounts went up.
“The answer is sometimes there will be rate increases and sometimes there won’t.
“They key is if you have a savings account already 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 however when the base rate rises, many argue it takes a while to see interest raised.
Ms Bowes continued: “Perhaps things will change going forward but I’m not holding my breath on that point.”
With inflation over five percent, many people will face their money losing value over time as savings rates can’t beat this percentage.
However, presenter Paul Lewis mentioned that he has seen some savings accounts with tempting offers for five percent.
Ms Bowes explained that these offers come from regular savings accounts, and they are usually fixed for 12 months or a certain term.
She explained that within 12 months, there is normally a maximum amount that one can pay into the account.
She said: “The one you’re talking about has a maximum of £250 plus you have to be an existing customer of that provider which is Cambridge Building Society.
“Now [savings in] that building society [account] will earn five percent because it will be deposited for 12 months, but the next payment you put in will only be deposited for 11 months and so on and so forth.
“Whilst you will get five percent it will only be for a short period of time so it’s not quite as much.
“But if you are saving on a regular basis, you can’t do better than that so I’m not knocking it.”
Rachel Springall, finance expert at Moneyfacts.co.uk also commented on the base rate rise.
She suggested savers “act swiftly” in order to take advantage of the deals being made available.
High street banks may not match the base rate on easy access accounts so looking towards alternative accounts or banks has been suggested.
She said: “Savers with their cash in a flexible account may have noticed it’s been a very volatile year of interest rate changes outside of any base rate change.”
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