Interest rates rose for the first time in more than a decade last week, but millions of savers will have to wait and see whether they will benefit from higher returns.
The Bank of England’s Monetary Policy Committee voted on November 2 for the base rate to increase by quarter of a percentage point, from 0.25% to 0.50%. The last time interest rates rose was in July 2007.
Whilst some savings providers reacted immediately to the rate change, many banks and building societies are still reviewing their savings returns and have yet to confirm whether they will pass on the increase.
Charlotte Nelson, finance expert at Moneyfacts.co.uk said: “Given it’s been such a long time since the market has seen a base rate rise, it is very difficult to tell whether providers will increase their rates straight away or decide to wait and see what the rest of the market does before making their move. Anyone looking for a savings deal now will need to keep on their toes and check the best buys to ensure they are still getting the best rate.”
Savings providers which have confirmed they will pass on the increase in full on some of their variable rate savings accounts include Coventry Building Society, Nationwide Building Society, Newcastle Building Society, and Yorkshire Building Society.
Remember that even if your bank or building society does pass on the rate increase in full, you may still be able to find better returns elsewhere.
Anna Bowes, of savings website www.savingschampion.co.uk said: “Even if your provider does pass on the full rate rise, if your savings are languishing in a high street account, you could still be getting a really raw deal.
“For example, NatWest and HSBC are both currently paying easy access customers just 0.01% gross/AER. If they pass the full 0.25% base rate rise to these customers, on a balance of £10,000, the interest earned will increase from £1 per annum to £26 gross per annum.
However, a savvy saver with Paragon Bank will currently be earning £131 gross per year (1.31% gross/AER) - still over £100 more than with NatWest or HSBC after a 0.25% rate rise.”
Some of the highest returns available are from current accounts. For example, Nationwide pays 5% annual interest on balances up to £2,500 held in its FlexDirect current account, provided you pay in at least £1,000 a month into the account. Bear in mind, however, that this rate is only payable for the first 12 months. After that, it falls to 1%.
TSB’s Classic Plus account pays 3% annual interest on the first £1,500 held in the account, while Tesco Bank also pays 3%, but on balances up to £3,000. To qualify for the Tesco rate, you need to pay in £750 a month and pay out at least three direct debits from the account each month. If you open the TSB account, you’ll need to pay in at least £500 a month and register for internet banking
Get the best savings rates with Savings Champion, call free on 0800 689 1857