Good news as savers see ‘green shoots’ – how to ‘make the most’ of ‘uptick’

Shop Well for Less helps family make huge savings with simple swaps

We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info

Over the past year, savings and investment rates have been hit hard by the economic downturn resulting from the pandemic, as the Bank of England continued to maintain its base rate 0.1 percent The outcome of this has been a lack of competitive rates on the market for savers looking to protect their hard-earned cash. Recently however, new offerings from financial institutions, such as Wesleyan Bank, suggest there is light at the end of the tunnel for savers.

Derek Sprawling, Savings Director at the Paragon Bank, believes this trend in interest rates has been “growing pace” in the last couple of weeks.

He said: “Over the course of the last few weeks, we have started to see green shoots across the savings landscape and average interest rates increasing at a growing pace.

“The trend originated in the fixed rate market initially, which saw rates move past the one percent mark last month – an upward trajectory that has since been maintained.

“This trend is also now starting to be mirrored on the easy access side, with some of the best-buy products now on the up, and the cash ISA market also showing signs of recovery.

READ MORE: How to improve ‘chances of winning’ before NS&I’s Premium Bonds draw

“This trend is also now starting to be mirrored on the easy access side, with some of the best-buy products now on the up, and the cash ISA market also showing signs of recovery.

“As the Bank of England Base Rate has remained at a historic low of 0.10 percent since the pandemic started, rates remain subdued in a relative sense compared to pre-pandemic, but there are a range of factors influencing this gradual uptick in pricing.”

The savers expert is offering insight to the British public on how these different factors could help them boost their savings.

Stamp Duty holiday

The Government’s Stamp Duty holiday dramatically increased the number of housing transactions to a record high, giving many Britons the opportunity to get onto the housing market.

“Rate increases across the savings market are a reflection of those higher lending requirements as financial providers fulfil these record numbers of completions,” Mr Sprawling explained.

“Although the deadline for the £500,000 threshold passed a few weeks ago, the stamp duty holiday remains available on properties valued up to £250,000 until the end of October, so that’s one factor pointing to today’s upward trajectory being maintained in the short term.”

Banks shifting averages

The most recent Moneyfacts Treasury report analysis found that instant access average rates sit around the 0.18 percent mark, which is less than a third of the rates making up the best-buy tables.

The savings guru said: “There is also a large disparity between average interest rates and best-buy rates.

“Our market analysis also shows that this large disparity is driven by the dominant high street banks, which have been offering very low rates throughout 2021 and pull the averages down.

“However, those bigger players offering very low rates continue to account for most of the deposits currently being saved in easy access accounts, so this disparity is likely to continue to be stark.”

Fixed rate market increase

On top of this, savers with maturing one-year bonds or ISA will be able to beat their previous rate if they buy the market best-buy, or the top-paying rate across a variety of specialist banks.

“There are a range of factors contributing to the fixed rate market moving first ahead of other product categories when it comes to price recovery,” Mr Sprawling added.

“Firstly, this is where the challenger banks are most active, it is therefore a more competitive space than easy access.

“The fixed rate category has also been in decline over the course of the pandemic, so providers are driving up price in order to entice savers to take up a fixed rate product.

“This has been effective, and we are seeing those competitive products perform well.

“My advice to savers is to make the most of this current trend and to take out those products while they last – the market at the moment is prone to volatility and it’s difficult to predict how it will fluctuate as we head towards winter.

“For customers not looking to fix their surplus cash, easy access rates are also consistently more competitive across specialist and challenger banks, so it’s a good idea to have a look at their provision in order to earn interest on all savings.”

Source: Read Full Article