No change in interest rates

Published:

07 May 2009

Topic:

News,Money,Interest rates,Mortgages,Savings

As expected, the Bank of England's Monetary Policy Committee voted to keep interest rates on hold at 0.5% again this month. The base rate looks set to remain at this level, probably for the rest of this year, but as far as consumers are concerned this does not mean it's a time to sit back and do nothing.

With interest rates at a historic low, returns on savings have been battered in recent months many people are questioning whether there is any point in seeking out an alternative home for their money at the moment. But there is every point. Banks and building societies are still desperate for our cash and as a result competition in this market is as hot as ever.

We have seen a number of new savings products launched this week. These include a 7.0% regular savings account from Alliance & Leicester (A&L), which is available to those who open a Premier current account in a branch or over the phone. In addition, A&L, along with Abbey and Bradford & Bingley - all part of the Santander group - have launched two-year fixed rate bonds paying 4.01%. And in a bid to attract money from those wanting to retain access to their savings, Sainsbury's Bank has increased the rate on its Internet Savings Account by 0.6 percentage points from 2.0% to 2.6%.

Kevin Mountford, head of banking at moneysupermarket.com, said: "Although on the face of it a rate of 3% or 4% may seem low, remember that these rates are significantly higher than the base rate and the rates on most savings accounts, so savers should really be looking to take advantage."

Borrowers are also urged to take action. In an interview with Stephen Noakes, mortgage director at Lloyds Banking Group, the country's largest lender, Noakes said mortgage rates are not likely to get much lower and therefore anyone currently paying their lender's standard variable rate should look to remortgage now. Although there have been signs recently of a slight improvement in the mortgage market, the best deals are only available to those with large deposits and this situation is likely to continue.

Many borrowers have been holding back from remortgaging in the hope that rates on new deals will fall, but with house prices still falling the risk is that by waiting they may see the capital they have in their home erode further, meaning they have less of a deposit. As a result they could end up paying more for a mortgage in a few months' time.

Noakes said: "The key message we've been giving to customers is really to look very closely about whether now is the right time to fix into that new deal."

You can find details of the leading savings and mortgage rates by visiting moneysupermarket's savings and mortgage channels.

For more on today's interest rate decision, watch our latest video.

Related Links

• Watch our interview with Lloyds’ Stephen Noakes, ‘Is the mortgage market recovering?’
• Watch our video ‘MPC Decision May 2009’
• Compare hundreds of UK savings rates
• Compare hundreds of UK mortgage rates