Newcastle Building Society’s decision to pass the increase on in full will see 99 percent of savers with a variable rate product benefit from a 0.50 percent increase. The rate changes will come into effect from 25th August, and will mean all its variable rate savings products will offer a minimum interest rate of 1.00 percent.
This is good news for savers as it may prompt more banks to increase the interest rate given on savings accounts as well. Currently inflation sits at 9.4 percent, which is no match for the base rate, but any extra cash could be vital for families on low incomes.
The interest rate has risen from 1.25 percent to 1.75 percent , its highest level since December 2008.
The Bank hopes to slow the rate at which prices are increasing, however has warned that inflation could pass 11 percent later this year.
Laura Suter, head of personal finance at AJ Bell, said: “Savers are the only winners of any interest rate hike.
“We’ve already seen a rates war break out in the savings market and savers are finally being rewarded for the cash they’ve stashed.
Rachel Springall, Finance Expert at Moneyfacts.co.uk, said: “Loyal savers may not be benefiting from the base rate rises and they could be missing out on a better return if they fail to compare deals and switch.
“Interest rates are rising across the savings spectrum. However, out of the biggest high street banks, only one has passed on all five base rate rises, which equate to 1.15 percen, and some have passed on just 0.09 percent since December 2021.
“The patience of some savers may be wearing thin, but there is no guarantee they will see any benefit from a base rate rise. Thankfully, challenger banks and building societies continue to compete in this space and the average easy access rate has risen to 0.69 percent, up from 0.20 percent in December 2021. With this in mind, there are still accounts out there that fail to beat base rate so there is still more room for improvement.
“Keeping abreast of the top rate tables is essential and there is little reason for savers to overlook the more unfamiliar brands if they have the same protections in place as a big high street bank.
“Easy access accounts remain popular, but savers must be sure to check the terms and conditions as not every deal will give them complete flexibility. In times of uncertainty, it’s wise to have quick access to funds to fall back on to cover unexpected costs.”
Chancellor of the Exchequer, Nadhim Zahawi said: “Along with many other countries the UK is facing global economic challenges and I know that these forecasts will be concerning for many people.
“Addressing the cost of living is a top priority and we have been taking action to support people through these tough times with our £37billion package of help for households, which includes direct payments of £1,200 to the most vulnerable families and a £400 discount on energy bills for everyone.
“We are also taking important steps to get inflation under control through strong, independent
Published at Thu, 04 Aug 2022 11:06:00 +0000