Interest rates first slumped at the start of the pandemic, when in March 2020 the Bank of England announced it was to lower its base rate to 0.1 percent. While they have been sluggish since then, a glimmer of hope has been provided recently, with interest rates – even on easy access accounts – slowly starting to rise again. Rising savings rates will mean a better return on the money people keep in their savings accounts.
This is likely to be the ultimate aim of those choosing to save in this manner, but there are also other important matters to consider.
To gain further insight, Express.co.uk spoke exclusively to Galina Stavskaya, Head of Investments, and Sarah Brill, Financial Coach, both from Claro.
Ms Stavskaya warned that although interest rates are rising, so too is inflation – currently at 2.1 percent, and therefore, if a bank is offering less than this, the value of cash savings will still be falling over time.
Ms Brill added: “Rising interest rates are caused by inflation, which happens when there’s increased spending and movement in the economy.
This group has reported that they regularly spend more than they earn, despite having a good salary.
For this reason, Ms Brill said, no matter what age, it is important to take advantage of the best interest rates.
If failing to do so, they risk their money not keeping up with their inflation and savings declining in value.
When interest rates rise, this is likely to be good news for savers who will be able to secure more of a return.
But with the future uncertain, it will be important to plan ahead, particularly given the circumstances of the last 18 months.
A rainy day emergency fund which is easily accessible is likely to provide some security, even if the interest rate is slightly lower than locking away cash.
Once this is established, however, some may wish to make their money work even harder.
The stock market can often outperform cash in the long run, and so some may choose investment as an option.
However, individuals should always do their research, and understand that they could get less than they originally invested due to fluctuations.
Many, though, will want to know what sensible next steps to take when savings rates do rise.
Ms Brill explained: “Keep calm and don’t make rash decisions! Interest rates rise and fall – it’s normal for the market to fluctuate.
“The best thing you can do is to get clarity around what you want to achieve so you can put your savings where they work best for you.
“Look at what type of accounts you have. Review your current account, regular savings accounts, easy access accounts and flexible ISAs.
“For savings you don’t need immediate access to, take a look at one or two year fixed rate bonds, Premium Bonds and ISAs.
“Go online and compare interest rates from different banks or building societies and make the switch if you could be getting a higher rate.”
Shopping around for the best rates as well as taking action are clearly key steps for Britons to adopt if they wish to improve their savings potential.
With the economy beginning to re-open again, many may be feeling optimistic about the future.
However, ultimately, Ms Stavskaya urged caution as it is not likely interest rates will increase significantly.
She concluded: “Guidance from the Bank of England indicates that the aim is to keep interest rates low in order to stimulate the economy. High interest rates promote savings, yet make borrowing more expensive.”