With the next Monetary Policy Committee (MPC) meeting on the horizon, many are anticipating a rise to the base rate to help control surging inflation.
A thriving labour market following the Furlough Scheme was unexpected but will also be crucial in influencing the Bank of England to raise the rate and amplifying predictions. But what does an impending hike in interest rates really mean for savers?
Higher rates mean higher returns. Should a long-awaited improvement in interest rates occur, people may welcome an extra top up to their funds placed in savings accounts.
Those saving for pricey purchases (e.g., cars and holidays) outside the realm of everyday goods, could benefit largely from an increase in fixed term deposits and notice accounts – and due to the nature of locking away cash for a set period, these rates are consistently better than instant access.
We also know that another advantage of rising interest rates would be for older generations on fixed incomes and other who rely on interest income to help cover their living expenses.
Of course, it is widely known that interest rates can be used as a tool to slow down soaring inflation and control consumer prices by encouraging people to save more and spend less. People should see the price of everyday goods and services become cheaper in light of higher bank rates.
The two go hand-in-hand, but better interest rates also mean savers can minimise the impact of inflation by utilising the market leading accounts.
When banks offer higher interest, the cost of leaving savings in poor paying accounts becomes greater. If left to inertia, individuals with large sums of money sat in low interest-bearing accounts could miss out on substantial returns.
Given the prospect of interest rate hikes, it is now more important than ever to avoid hoarding cash in low paying accounts, in order to maximise returns. Those that choose to hold cash in savings can effortlessly access multiple accounts and interest rates using the Flagstone cash deposit platform. Chat to us today to find out more.