Amid rising concerns over inflation, there is good news for UK savers! The Bank of England base rate is reportedly set to rise again on 3 February. This could help savers to beat inflation and tackle the growing costs of living. Here’s what the proposed rate increase could mean for you.
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Could the Bank of England base rate rise to 0.5%?
Recent reports suggest that the Bank of England will raise the base rate to 0.5% when the Monetary Policy Committee meets on 3 February! The current rate of 0.25% was introduced in December 2021, meaning that a further increase would be the second in just two months!
This is excellent news for savers. Savings account providers may follow suit and increase their own interest rates to stay competitive in the market.
This will be the first time that the Bank of England has raised the base rate at two consecutive Monetary Policy Committee meetings since 2004. It is thought that the bank feels pressured by the current rate of inflation, which is exceeding its predictions.
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What could a base rate increase mean for you?
While an increase in the base rate comes as a relief for savers, those currently in debt could be in trouble!
If you have a mortgage or loan with a variable interest rate, your monthly payments could go up. Mortgages or loans that follow the Bank of England’s base rate will be affected by the decision to increase interest. However, those with fixed-rate mortgages or loans may avoid higher payments for the time being.
The fine print on your mortgage agreement should state when any changes will be passed on to you. For many, this could be as soon as next month!
How can you make the most of higher interest rates?
With the interest rates set to rise, now could be a great time to take a look at your current savings account. A hike in the Bank of England base rate could affect the rate offered by your current provider. However, if your savings account provider doesn’t increase its rates, you may want to make a switch.
However, many alternative savings accounts providers offer rates that are still higher than the proposed 0.5% rate. While the Bank of England may be increasing the base rate, savers in the UK should still try to shop around for the best deal. There are a number of savings accounts that offer rates of more than 1%. Investing your money into a high-rate savings account is the best way to keep up with inflation.
The Bank of England base rate increase could also have a positive effect on ISAs. ISAs offer tax-free interest to savers and often provide higher rates of interest than high street bank savings accounts. If the interest rate of your ISA or savings account is variable, you may be gifted with a rise! Those with fixed-rate accounts may want to swap to alternative options in order to benefit from the base rate increase.
How do you find the best savings account?
Investing in a high-interest savings account is a great way to grow your money. You can easily find the best option for you by taking a look at our list of top-rated savings accounts. Alternatively, you could use a savings calculator to find out how much your money will grow under a specific interest rate. This is a good tool to use if you have a particular financial goal in mind.
