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Consumers expect base rate to rise within a year

Consumers expect base rate to rise within a year

Category: Economy

Updated: 27/09/2010
First Published: 27/09/2010

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The Bank of England's base rate of interest may have been stuck at 0.5% since March 2009, but expectations for a rise within the next 12 months are increasing.

In fact, more than two thirds (68%) of people expect the Bank of England's base rate to increase over the coming year, research conducted by Santander has found.

A third of people expect the rate to rise to either 0.75% or 1.00% over the period, while a quarter expect an increase to between 1.00% and 1.5%.

An additional 11% of people think the rate will increase to 2.00% or more, which would be good news for savers but could cause some real problems for homeowners whose mortgage repayments are linked to base rate.

Just 5% of people think it will fall further, while 28% think it will stay at the same level for another 12 months at least.

With many people expectant of an increase, Santander says it has seen an increase in demand for savings accounts that track the base rate.

The products see the rate of interest increase as the rate rises, although there is also the possibility of returns dwindling should the measure fall.

Almost four in ten savers claim to have invested their funds in a tracker account.

With average savings levels consisting of over £20,000, Britons certainly stand to gain should the base rate show any significant growth.

"There's clearly a widespread expectation amongst consumers that the Bank of England's base rate will rise over the next year," said Reza Attar-Zadeh, director of savings and investments at Santander.

"We're really pleased to see that so many people are already planning to take advantage of these predicted movements by ensuring that their money is saved in an account that tracks the base rate."

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