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Savers should consider locking into fixed-rate deals before interest levels fall further, experts have warned.
Yesterday the Bank of England (BoE) cut the Bank Rate by 0.5 percentage points to 0.25pc. High street banks factor this rate into the interest they pay savers, meaning rates will begin to fall.
Banks normally take three days to three months to pass on Bank Rate cuts to savers, according to Rachel Springall of Moneyfacts, the financial analysts. Many will alter their rates from the first working day of the month after the change.
Therefore savers have a narrow window of opportunity to take out the best current deals before banks start cutting rates en masse. Fixed-rate deals guarantee the level of interest paid and help protect savers’ cash against further interest rate changes in the future.
The last time the Bank of England cut rates – from 0.5pc to 0.25pc in August 2016 – the average interest payment on easy-access accounts fell from 0.5pc to 0.41pc in three months. Variable cash Isa rates fell from 0.96pc to 0.74pc, and fixed-rate Isa payments dropped from 1.05pc to 0.87pc.
Around 80pc of all savings cash is held in easy access accounts with variable rates meaning these savers will see interest levels fall the fastest.
The top one-year fixed rate bond pays 1.56pc, from Smart Save and Swedish-based Ikano Bank, once part of Ikea.
However, customers will need at least £10,000 to open the Smart Save bond and just £1,000 for the Ikano deal. Both deals can only be opened and managed online.
Anna Bowes, of Savings Champion, the financial experts, said: “If you have the money there is no harm in looking, but you need to go with the best rates and not go with your bank. Rates will fall further, and all bets are off.”
What is an easy-access account?
The only savings firm to pass on the base rate cut so far is Bank of London & Middle East, whose deposit account deals were cut by 0.25 percentage points yesterday.
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