Over the past few weeks, there seems to have been an almost constant stream of worrying news and lingering uncertainty.
Inflation remains stubbornly high, gasoline prices are expected to rise further on oil production cuts, and savers are understandably cautious about what the future may bring.
The potential for a Bank of England base rate hike to 4% was only a few months ago the upper end of market expectations, but that figure has now risen to over 5%. With such rapid change, it’s easy to forget that the base rate started the year at just 0.5%.
Savers and the market face a similar problem; trying to plan for the future while reacting to the present.
While we may wish to have the luxury of waiting and seeing what lies ahead, market sentiment must constantly adjust and readjust to fluctuations and minute-by-minute announcements – while savers might wait too long and fail to find the right product for them.
When it comes to finding the right product, savers are faced with the challenge of doing so in an environment we haven’t seen in over a decade.
Years of little or no change in the base rate meant that the differences between the returns offered by high street financial providers were both small and stable, with customers seeing little interest earned on their savings pots .
With low yields, many savers saw little reason to spend time finding better rates for minimal changes in yield.
Data collected by the CACI on deposits held by its members showed that until recently more than £430bn of savings were held in accounts offering only up to 0.1% – but with With the base rate now at 3%, savers must adapt to the new circumstances and familiarize themselves with the products and rates now available to them.
This not only takes time, but also means looking beyond the big providers.
For example, on two-year fixed rate ISAs, savers may be looking at typical returns of 3.60% – but by taking a proactive approach and looking beyond the high street, savers will be able to find rates of 4.6% and above through the challengers.
Savers should pay close attention and research these alternatives and consider the benefits of fixed-term products if they want their hard-earned savings to provide them with the best possible returns.
Recent figures from the Bank of England also show that £3.2bn was deposited in bank and building society accounts in August, down £700m from July, but it There was an increase of £800million in the total amount deposited in National Savings and Investment Accounts. – a positive indication that savers are starting to take a more proactive approach, although savers are still advised to look to challengers to see if stronger fixed yields are available.
As we await further interest rate decisions and further economic policy announcements from the government, savers should use the time to review their own circumstances and plan accordingly – and ensure they get the returns they deserve when they need them most.
Derek Sprawling is Director of Savings at Paragon Bank