When the Bank of England announced the first increase in interest rates for a decade, savers across the country could be forgiven for giving a little cheer.
They’ve endured years of pathetic rates with returns on most accounts not even beating inflation.
Yet any little pang of joy experienced will have been extinguished as there hasn’t been a widespread increase in savings rates.
What’s going on? Are banks as well as building societies ripping us all off?
The simple answer is usually no, at least not because they haven’t immediately passed on Thursday’s 0.25% interest rate rise.
Pass in which on!
Mark Carney, the Bank of England governor, said he expected all providers to raise returns for savers.
“Banks did pass on the cuts to their depositors, as well as we expect competition to push in which within the various other direction,” he said.
as well as the fact is usually they will – in their own not bad time.
- First interest rate rise in 10 years
- What will the rate rise mean for you?
in which’s a certainty in which all the major savings institutions will improve the interest rates they pay on deposit accounts by the beginning of December.
They just don’t react to a Bank of England base rate change immediately anymore.
“The link between the bank base rate as well as savings has been severed for years, most recently thanks to government lending initiatives, which has meant banks don’t need savers’ cash to fund their mortgage books as they used to,” explains Rachell Springall of Moneyfacts.
In short, the savings rates they offer are driven by competitive pressures rather than tied to the Bank of England rate.
in which means you’re far more likely to get a decent return through a smaller institution which is usually keen to build up its business.
as well as those banks as well as building societies in which have announced plans to raise savings rates through December are simply doing “a PR exercise”, according to Andrew Hagger of Moneycomms.
“various other banks as well as building societies, perhaps which has a larger as well as more diverse range of savings products, will take a more considered view as well as will need internal approval before doing an announcement,” he says.
although whether they announce quickly to get a PR advantage, or wait a week or so to take a considered view, savers won’t be affected as rate improvements normally take a month or so to take affect.
In any event, rather than being concerned about such a minimal increase savers would likely do better to actually check what rate they’re being paid. They’re likely to be in for a shock.
- Savings rate at record low
- Are more interest rate rises ahead?
The average easy access account rate has fallen through 0.45% in December 2016 to just 0.37% today, according to Savings Champion.
“With savings rates with the High Street providers paying as little as 0.01%, in which’s time for savers to vote with their feet as well as earn as much interest as they can elsewhere,” says Anna Bowes of Savings Champion.