The Bank of England’s governor, Mark Carney, has indicated that a base rate rise is looking increasingly likely to happen, and potentially as early as December.
However, while savers have expressed optimism that interest rates might start to rise above the 0.5 per cent mark, they are being warned that an increase in the base rate may not necessarily result in a higher return on their savings.
While interest rates on savings accounts started to decline along with the base rate before 2009, there was no change to the latter for a long duration and the interest rate continued to fall in the following years.
Anna Bowes of savingschampion.co.uk said: “The traditional relationship between the Bank of England base rate and savings rates has been severed for some time, and we don’t think it will necessarily be restored.”
Due to the lack of clarity regarding future interest rates, savers are being urged to take full advantage of the best deals currently available rather than waiting for rates to increase across the board.
Anyone looking for a fixed rate savings account has abundant options in the marketplace, following a range of new products launched by the challenger banks.
Last Friday, Paragon launched a market-leading one-year fixed-rate bond that pays 2.07 per cent.
For products with a long-term fix, My Community Bank pays 2.75 per cent for customers that can lock their savings in for three years, while Paragon pays 3.06 per cent over five years.