Interest rates 'not getting fed through' to savings says expert
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Earlier this week, the Bank of England confirmed an interest rate increase to 0.5 percent. As a result of this, savers are wondering if their pots will benefit from the most recent hike in rates. On BBC Breakfast, journalist Nina Warhurst was out in the streets speaking to financial experts about what the energy price cap and interest rate announcements mean for everyday savers.
Viewers were able to ask their questions to the experts Sarah Coles, senior personal finance analyst at Hargreaves Lansdown and Morgan Wild, head of policy at Citizens Advice.
Sharing a question from William about savings, the BBC journalist asked Ms Coles whether savers will benefit in any way from the most recent interest rate increase.
Ms Warhurst said: “William is one of those fortunate people who have got in touch and said ‘When will these interest rates hit my savings?’.
“So he sees this as a positive, this increase in interest rates. Is it good news?”
Ms Coles replied: “Well there are an awful lot of people with savings after the pandemic and the bad news is that unfortunately the interest rates just aren’t getting fed through.
“The last time we had a rate rise it actually only increased easy access accounts, which only hold about 60 percent of our savings.
“They only actually went up by 0.01 percentage points which is a really, tiny fractional amount.”
She added: “Your savings rates aren’t going up but they might go up if we get more and more rates over the rest of the year.
“We might see them start to creep up but the banks don’t really need your money at the moment as they’ve got plenty of cheap money from the Government.
“So they are not in a desperate rush to raise rates.”
The Bank of England’s Monetary Policy Committee voted by a majority of 5-4 to increase rates.
This latest intervention from the MPC represents the first back-to-back interest rate hike since 2004.
The financial group also voted unanimously to begin the process to reduce the amount of quantitative easing.
Rates are set to rise from 0.25 percent to tackle the UK’s skyrocketing inflation which is leading to a spike in the cost of living.
In December 2021, the Bank of England increased interest rates from 0.1 percent to 0.25 percent, citing that it could no longer ignore rising inflation and needed to intervene.
Interest rates could go as high as 1.5 percent by spring which the bank hopes will lower inflation to its two percent target.
As well as this, Ofgem has announced that the energy price cap is also going up, with the average energy bill set to hit almost £2,000 later this year.
Combined with skyrocketing inflation and “tiny” interest rates, financial experts are urging people to start saving and cutting costs to mitigate the impact of the rise in the cost of living.
Alongside Ms Coles, Morgan Wild of Citizens Advice encouraged anyone concerned about their finances during the BBC Breakfast segment to reach out to the financial support charity for guidance if they need it.
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