Interest rates marooned at 0.5% - Economy - News - Moneyfacts

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Interest rates marooned at 0.5%

Interest rates marooned at 0.5%

Category: Economy

Updated: 07/10/2010
First Published: 07/10/2010

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 It is now over 6 months old so the content may be out of date.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 has announced that base rate of interest will remain at 0.5% for at least another month.

It is an announcement that comes as little surprise, although it remains to be seen whether Andrew Sentance – one of the nine members of the Monetary Policy Committee – vote for a rise as he has done in recent months.

Minutes released later in the month will detail how the members voted, although an 8-1 voted in favour of a freeze, with Mr Sentance voting for a 0.25% rise, is most likely.

The news will be welcomed by many homeowners, if not by savers.

Recent figures from Halifax showed the low interest rate environment has made mortgage repayments markedly more affordable.

It is thought that the number of repossessions and people falling into arrears would have been far higher had interest rates not been frozen at an historical low, where they have now been for 19 months and counting.

While the low base rate represents a continuing boon for many homeowners, savers in the UK are being hampered by a combination of low interest rates and stubbornly high inflation.

They could be waiting some time yet for salvation, as a rise in the forthcoming months looks unlikely, with most predicting an increase at some point in 2011.

The good news is that there are a number of savings accounts on the market that offer an excellent alternative to waiting for an interest rise.

They include the Cash ISA Direct Reward from Halifax, offering clients a top rate of 2.80%.

Other popular ISAs available at the moment include the Northern Rock ISA Breaker, which pays a rate of 3.00%, the Barclays Golden Cash ISA Issue 2 that pays 2.08%, and the Santander Direct ISA that pays 2.75% on deposits of £9,000 or more.

If you already have an ISA and would prefer to just invest your money for the next year in the hope that interest rates will be higher when your money matures, ING Direct offers a rate of 2.75% for 12 months (reverting to 0.50% thereafter).

Northern Rock's fixed rate bond range could also be worth a look offering rates of up to 3.00% on your funds.

Find the best savings rates for you - Compare savings accounts

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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