Last week's rate cut could spell disaster for savers however for those willing to move their money there are still good returns to be had.
In recent times British savers have been lulled into a false sense of security with interest rates climbing year on year since mid 2003. However, after the Bank of England announced its second base rate cut since December when the Monetary Policy Committee met last week returns are looking a lot more uncertain for those who have become used to profitable cash based investments.
While both home owners and those looking to secure other finance will be more than pleased at this light relief from previously spiralling interest rates, the news is not so good for those who have been saving for a rainy day as rate cuts usually mean a cut in returns.
If market surveys are to be believed this decision by the MPC will affect an ever increasing proportion of the British public as more of us than ever before are starting to reign in our spending and build emergency funds to buffer our overstretched wallets against the increasing cost of living.
Traditionally, banks and building societies have been quick to reflect any downward shift in the base rate onto the interest payable on their savings products. However, this time around savers may not be at such a disadvantage.
While the interest payable on many savings accounts was dropped in line with Decembers rate cut, not all banks followed suit and on average the rates available on new saving products have remained reasonably high.
This is largely thanks to the financially uncertain climate that we’re living in as since the Northern Rock debacle the inter bank lending that usually finances the economic pursuits of financial institutions has become increasingly expensive and harder to come by. This has led banks and building societies to look to retail income as an affordable means of financing their ability to provide loan and mortgage products.
As a result there are still good deals to be had with rates up to 6.5% available on instant access products. However, savers still need to stay on their toes, regularly checking the interest rates that their savings accounts are paying and, where necessary, moving their money and chasing the top rates so that they continue to get the best return possible on their hard earned cash.
