Many of you will know that while today’s decision is great news for those with a mortgage, it’s not so good for savers.
That being said, the cut today may not do as much damage as some may fear.
We spoke to Mark Hicks, head of active savings at financial services firm Hargreaves Lansdown, to explain why…
“A rate cut is never going to be music to the ears of savers, but this shouldn’t do too much damage – the market was split on whether we were going to get a cut, so decisive action from the Bank of England is going to mean some banks bring rates down slightly, especially among easy access accounts, but we’re not expecting massive movements,” he says.
He says what really matters is what happens around expectations of rate cuts in the future.
“If the Bank of England decides to cut rates twice and then pause, we should see minimal disruption to the savings market,” he says, but “more consistent rate cutting of four or more would drive greater savings rate change”.
What savers should be looking at
As it stands, the market is currently not predicting any significant falls for savers.
“At the moment, the highest easy access rate and one-year fixed rate accounts still pay over 5%, so savers can still beat inflation by an impressive margin,” Mark says.
The highest easy access rate on HL Active Savings is 4.67% and the highest fixed rate is 5.06%, he adds.
“When you add in the effect of the current cashback deal, this takes it to 5.26%.”
Mark says if you don’t need the cash for a while, fixed term rates offer the best returns from a risk reward perspective, “so it’s worth securing a rate by considering a fixed rate deal while these rates last”.