It’s been a bad couple of years for savers as the low base rate environment has made it all but impossible to get the high returns they have been used to. But could that be about to change?
Inflation is high and there’s pressure on the MPC to raise interest rates in order to combat that. But the economy is still very weak and the bank’s governor Mervyn King has said he believes hiking rates is not the answer.
And, of course, higher rates will hurt people paying mortgages too. At the moment, an increase in base rate of just of one percentage point would add £88 to the average tracker mortgage.
If base rate rises are on the cards, how can you protect your pocket from the impact? Our banking expert Kevin Mountford is outside the Bank of England with his top tips.
Kevin Mountford: Savers have really struggled to get a good return. However it’s worth noting that most UK savers get really woeful rates, and could do a lot better if only they’d take control of their finances. So I’d just say to everybody that’s able to save some money, look around and make sure you get the best deal.
And for those that can’t, you need to look more broadly at all the products and services that you get and take some action now to ensure you get the best value, and hopefully you can release some of your household budget that you can put into a savings account.
There’s no doubt that an increase in base rate will have an impact on mortgage customers – in fact a recent poll that we undertook at moneysupermarket.com, 17% of respondents said they would struggle to pay back their mortgage if base rate increased. Although there are options around fixed and tracker products, there will be an initial high in household expenditure, so it’s important - more than ever – that people take control of their finances to ensure they get the best value products and services.