Will the Bank of England cut interest rates and should you lock into a fixed-rate bond now?

Savers should consider taking out a fixed-term bond now, experts say, as the Bank of England could deal a blow to interest rates this week.

Economists think the central bank is likely to cut Bank rate from its current level of 0.75pc on Thursday to encourage consumers to spend money and not hoard it. A decision to cut the rate would be a blow to savers, as many banks factor it into the interest their deals pay.

While banks have slowly been trimming rates on their savings deals anyway, a cut to Bank rate would cause this fall to steepen.

Fixed-rate deals would offset the impact of this on savers’ cash. The top rate for a one-year bond is 1.65pc, offered by Atom Bank and Habib Bank, then 1.6pc, from Zenith, The Access Bank and Masthaven.

Fixed-term bonds with a top rate would also protect savers’ cash against the eroding effect of inflation, which fell to 1.3pc in December 2019.

Tom Adams, of Savings Champion, a financial data firm, said: “If there’s a Bank rate cut then it’s likely that a lot of savings rates will come down so it does make sense if you lock in at a decent rate."

But savers would be gambling that savings rates would not rise much during those 12 months, leading to their cash being locked into a lower rate. As a result Mr Adams said savers should try to have a mix of easy-access and fixed-term deals.