More in this section

Mortgage bungee gives savers succour

What goes down, must eventually come up.

That might sound like it breaks the fundamental laws of physics, but we refer here to interest rates.
As any fule no, as the fictional Molesworth would have said, interest rates have been at historic low levels for the better part of a decade.

So, if you are one of the 3.5m residential mortgage holders on a competitive tracker rate, even with this small increase you can quite rightly continue to congratulate yourself. The rest of you sensible types on fixed rates should explore all options as your product nears the end of its fixed period.

Of course, with all things interest-rate related, where there is bad news for borrowers, there is good news for savers.
Those of you with savings should see a similar rise in the interest rates payable by your provider. Well, you should, at any rate. Bear in mind though that the Bank of England’s base rate rise to 0.75 per cent does not always guarantee a rise from your provider. In fact, according to data from Moneyfacts, half of all banks did not move after the last rate rise and as of last week, no High Street bank paid more than 0.5 per cent on their easy access savings accounts.

The bungee rope of savings is in full play here and it is advisable for every saver to make sure their provider reacts appropriately to the rise in the base rate. It has been calculated that a borrower on a typical £150,000 variable rate mortgage will see their monthly repayments increase by about £18.67. Will this be reflected at the other end of the see-saw with a similar rise? Time will tell.

It is important then that those of us with Cash ISAs or other cash savings products keep an eye on the interest rate your provider offers and even hold them to account, if you’ll forgive the pun, by switching your savings to a better paying account. Our Market Tracker Cash ISA does just that by monitoring the highest interest rates paid in the easy access market. This is calculated using data from Moneyfacts® and pays an interest rate which is the average of the 20 highest gross annual variable interest rates around.  These accounts do the hard work for you and make sure that your cash is always earning a decent return.

Indeed, the mighty regulator -the Financial Conduct Authority is considering an idea to impose a Basic Savings Rate which would automatically apply after an account has been open for a period of time, say one year. It said customers who do not shop around should be treated fairly by their banks or building societies. We wholeheartedly agree.

The FCA said the total amount long-term savers could be losing by not seeking out top-ranked savings accounts was £480m and that they could gain an average uplift of 0.82 per cent interest a year by switching.

So to avoid being snapped by the unexpected return of the savings bungee – please do shop around. Family Building Society would be a good place to start…

By McDowell

comments powered by Disqus
Family Building Society
Ebbisham House
30 Church Street
Surrey KT17 4NL
Follow Us