Earlier this month, the Bank of England made the decision to cut interest rates from 0.5% to 0.25% – the first cut since 2009. Here’s what the change means for your savings.
Stimulus package
On the 4th of August, Mark Carney, the Governor of the Bank of England, unveiled a stimulus package designed to boost the economy and ward off a recession following the vote to leave the European Union. Carney vowed that the bank would take whatever action is needed to promote financial stability and said that although the adjustments may prove difficult, the UK can handle change.
Through the actions taken… we have improved the economic outcomes for this country. There will be less unemployment, more activity, and there will be a greater prospect of a successful adjustment to the new realities that the UK faces, he said.
Bad news for cash savers
Although the rate cut came as welcome news to many borrowers, especially those with a bank rate tracker, mortgage savers have not been so pleased as many will now see a worsening return on their savings.
Speaking of the woeful returns for savers, Andrew Hagger of Moneycomms.co.uk said: 2A Bank Rate cut will inflict further misery on savers, who will see rates heading towards zero and their savings income fall to pitifully low levels.”
There is a danger that ultra-low rates could drive some people to look at stocks and shares or peer-to-peer investments without understanding the risks and whether these choices are appropriate for their circumstances.
What now?
With market uncertainty and further cuts expected before Christmas, savers are expecting things to get worse before they get better.
Guy Anker, managing editor at MoneySavingExpert.com, has advised savers to ensure that their savings are in the right place: “Savings rates were already dire and may get worse.”
The key is to ditch poor-paying accounts and get creative as you can gain more in a top current account some pay 3-5% compared to 1%-ish on standard savings accounts. Another option is to use spare cash to clear expensive debt, as long as you have access to an emergency fund for a rainy day.
Review your savings account
How does your savings account compare? If you haven’t already, check your rate and switch to a top payer. However, as Anker points out, the rate on any account could drop in the future, meaning the rates may not be quite so attractive in the months or years ahead.
Can UWM help?
At UWM, we have been helping UK and local Leeds-based businesses with our number-crunching expertise for more than 30 years.
We offer a range of accounting services, including bookkeeping and tax planning. If you need help managing your company’s financial future, UWM’s tailor-made business planning service is the ideal solution.
For more information, call 0113 231 0202 or complete our online contact form, and a member of our team will be in touch soon.
