Interactive Investor expert on decision to raise interest rates
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In a bid to control inflation, the Bank of England’s Monetary Policy Committee (MPC) has raised the UK’s base rate nine consecutive times. Currently sitting at 3.5 percent, this boost to the base rate has been passed onto savers and homeowners by banks, building societies and lenders. While an interest rate rise is traditionally viewed as beneficial, experts are highlighting that savers are not taking advantage of this hike and will not see any rises passed to them as a result.
High street financial institutions, such as Nationwide Building Society and Santander, are passing on regular rate hikes to their customers.
One of the best savings offerings at the moment comes from first direct and its Regular Saver Account which is paying a rate of seven percent.
However, experts are highlighting that many other banks are not passing on the base rate directly to their customers.
On top of this, savers with banks which have boosted the interest rate of their products are not taking out the products which are enjoying these increases.
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Speaking exclusively to Express.co.uk, Lucinda O’Brien, a personal finance expert from money.co.uk, broke down how savers can take advantage of the recent changes to interest rates.
Ms O’Brien explained: “The Bank of England base rate stands today at 3.5 percent. In January 2022, the base rate was only 0.25 percent and the Bank of England forecast is that rates could rise to 5.2 percent by the end of 2023.
“Despite increasing interest rates creating challenges for those who owe money, savers can benefit from this increase.
“However, many high street easy-access savings accounts may not pass on the interest rate rise, meaning you’d be unlikely to see any large increase in interest overnight.”
The finance expert noted that when the base rate jumped to its current level, monthly savings average rates remained at 2.83 percent.
In light of this, Ms O’Brien recommends people move their cash to a high interest account at a fixed rate as soon as possible to really take advantage of the Bank of England’s recent moves.
She added: “Any savers who don’t move their money to the highest interest rate savings account will be missing out.
“It’s important to note, the highest rates will often be found in fixed-rate savings accounts, which is not ideal for those who may need to dip into their savings over the next few months due to the current cost of living.
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“Therefore, it would be wise to diversify your funds in order to get the best of both worlds; keeping an emergency fund in an easy-access account to ensure simple last-minute withdrawals if needed, while moving the rest to the top-rated fixed-rate savings account to best benefit from high interest on your savings.”
However, Ms O’Brien notes that those with a mortgage on a fixed-rate which is coming to an end this year will be at a severe disadvantage.
With the Bank of England likely to raise the base rate even further in the months ahead, she also shared advice on homeowners looking to lessen the eventual blow of higher mortgages.
The savings expert said: “Those whose fixed-rate mortgage is coming to an end soon may want to consider changing their deal early to take advantage of interest rates before they increase.
“However, remortgaging before your current deal ends could mean you’ll need to pay an early repayment charge (ERC).
“You should compare the cost of the ERC to how much you think you could save by remortgaging, to ensure that switching early is worthwhile.”
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