This Morning: Martin Lewis gives advice on interest rates
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On ITV’s This Morning today, a question came in from a viewer wanting some help on what she should do with the savings she currently has in her five-year fixed rate ISA. Margaret told This Morning that her ISA was coming to an end in November 2023 and it had been paying a rate of 2.3 percent which had been “very good” over the last few years. However, due to the Bank of England’s interest hikes over the last year, it had now fallen behind.
Margaret asked: “Is it best to leave it or transfer it to better cash ISA and lose the 190 days of interest? Or would it be a good idea to fix it again for a number of years?”
In response, Mr Lewis first confirmed that Margaret’s penalty for leaving was 190 days of interest and the interest rate of her ISA was 2.3 percent.
He then added: “So let’s do it really simply, she loses 180 days worth of interest for going. That’s equivalent to 1.15 percent because it’s half a year, so half the rate she’s getting.
“She can increase the rate right now and if she went for the top two-year fixed, that’d be roughly about 4.4 percent, so she could increase it by over two percent.
“So she wouldn’t gain as much over the 180 days, but she would probably gain more over November 2023.”
Mr Lewis then stated that there was “no problem” in ending it early and transferring the money to an ISA with a higher interest rate such as 4.4 percent.
Mr Lewis said: “If she were to go for a rate that high she would earn more.”
However, Mr Lewis added that he is expecting the Bank of England to increase their base rates again on Thursday this week.
The central bank is continuing to raise its interest rate as a way of curbing the high inflation the UK is seeing, In the year to September 2022, inflation hit 10.1 percent.
Currently, the base rate is 2.25 percent and most economists think that it will likely rise by 0.75 percentage points to three percent.
Mr Lewis noted that if Margaret wanted to move her ISA savings, then she should not do it this week as rates may “creep up” even further after the Bank of England’s announcement.
Mr Lewis added: “So you might as well hold off a few days and see where it goes.
“But there’s not that much wrong with either keeping it where it is or moving it. On simple numbers you’ve probably gained by moving it to a new fix in a week or two.”
Over the last few months, banks have been criticised for being slow in passing on the interest rate rises to their customers.
However, in recent weeks, some banks have begun to offer interest rates of over five percent on some accounts.
Mr Lewis opened his segment by stating that the topics of savings and interest rates will be delved into deeper on his ITV show The Martin Lewis Money Show this evening at 8pm.
When asked by This Morning Presenter Holly Willoughby what he would be discussing on the show, Mr Lewis said: “Well, the big savings rip off as we’ve seen, the Bank of England put interest rates up continually since last December and will likely to go up again this Thursday.
“Variable mortgage rates have gone up but most people still have spit-worthly low savings, many below one percent even though you can earn up to five percent in the top savings.”
“If you’re thinking, ‘Who on earth has savings these days’, then you will be surprised as more people have savings accounts than debt accounts in the UK.”
Mr Lewis then highlighted that during the period of the COVID-19 pandemic, the UK built up £190billion worth of savings.
He added: “So if you want to know how to boost your savings, interest and stop being ripped off, that’s tonight at eight o’clock, and I’ve got loads more to talk about as well.
“And of course get in touch if you have got questions you want me to answer there too, on anything, not just savings.”
This Morning can be watched weekdays at 10am and the Martin Lewis Money Show is currently on every Tuesday at 8pm on ITV.
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