Savers warned it could take months before they see much improvement to rates
People should check when the dust has settled to see if they are on a good deal – and if not, switch – experts have said.
Savers are being warned it could take months before they see much impact from the base rate hike to 0.75%.
Experts also said savers should see the base rate rise as a “powerful trigger” – and prepare to swoop if they do spot a good savings deal in due course.
Many major savings providers have said they are still mulling over exactly how they intend to apply the base rate rise to their products.
Alistair Wilson, head of retail platform strategy at Zurich, said low rates and inflation have been eating away at savers’ cash.
He said: “For retirees relying on interest to supplement their income, rates are finally heading in the right direction, but they still need to rise further to make a significant difference.
“It could also take months before savers actually see the impact of today’s hike, as with last November’s quarter of a per cent increase, which has only resulted in an average 0.07% rise on easy access accounts.
“Consumers should still consider what else they can do to help their savings grow.”
Guy Anker, deputy editor of MoneySavingExpert.com, said: “For savers, today’s rise should act as a powerful trigger to review your accounts and ditch and switch if a better deal appears.
“Many put up with paltry 0.1% returns – or worse. Even without the base rate jump it was possible to earn much more than that, but the best deals will hopefully – but not definitely – creep up.”
Mr Anker continued: “Even if you earn what you think is a decent interest rate, check in a couple of weeks once the dust’s settled if it’s still good relative to the best buys, as there’s no guarantee your bank will pass the rise on to you.”
Meanwhile, Sir Steve Webb, a former pensions minister who is now director of policy at Royal London, said people should still find they can comfortably put money into their workplace pension, despite the impact of rising rates on mortgage payments.
Minimum contribution rates into workplace pensions are set to increase from April 2019 under automatic enrolment, as part of efforts to encourage people to save more for later life. This follows a previous increase in minimum contribution rates earlier this year.
Sir Steve said: “In general, any rise in mortgage costs would be expected to give employees less money to put into their pension.
“However, given that many mortgages are now on fixed-rates, it may be some years before most workers see any increase in their mortgage costs.
“At the same time, one of the reasons for the rate rise is the improving outlook for real wages.
“This is far more important for workers’ confidence than gradual increases in mortgage costs.
“The improving prospects for wage growth increases the chance that the April 2019 increase in contribution rates will again be comfortably absorbed by employees.”