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Savings rate rises slowed ahead of base rate hike

Savings rate rises slowed ahead of base rate hike

Category: Savings
15/08/2018

The latest figures from Moneyfacts.co.uk reveal that the number of savings rate rises fell by 36% in July, just before the Bank of England announced an increase in base rate. This means that, with the Consumer Prices Index (CPI) at 2.5%, savers have even less hope of beating inflation.

In contrast, June saw the highest number of savings rate increases (142) since December 2017 – the month after the previous rate rise – which makes the 90 rate rises recorded in July quite a drop. "It seems providers may well have put the brakes on some savings activity while they waited for the Bank of England to make a decision on raising interest rates," Rachel Springall, finance expert at Moneyfacts.co.uk, said.


Fixed rate bond analysis Jun-17 Jul-17 Dec-17 Jun-18 Jul-18
Number of savings rate rises 125 151 237 142 90
Number of fixed rate bond rises 97 91 35 106 53
% of rises that were fixed bonds 78% 60% 15% 74% 59%
Average fixed rate bond rise 0.15% 0.17% 0.22% 0.12% 0.30%
Source: Moneyfacts.co.uk

Despite this, savings rate increases continue to outweigh cuts for the 18th consecutive month, with just 47 cuts recorded. Most of the savings rate rises, meanwhile, were for fixed rate bonds, as the table above shows.

While this may be bad news for easy access savers, considering the CPI measure of inflation increased slightly from 2.4% in June to 2.5% last month, fixed rate bonds are still the only means of beating inflation. Indeed, there are now 21 fixed rate bonds (based on a £10,000 deposit) that can match or beat CPI, which may not seem like a lot, but as there were none that could do so just a few months ago, it's not a bad number to have.

As Rachel pointed out, we once again have challenger banks to thank for this number, too, as they are the ones repricing fixed rate bonds to maintain a prominent position in the market, "albeit less vigorously than before, as the number of fixed rate bond rises fell by 50%, sitting at 53 rate rises in July down from 106 in June." Regardless, 11 out of the 21 bonds that can match or beat inflation were ones that saw rate changes in the last month, so keeping an eye on those fixed bond charts can still make all the difference for savers looking to get a high return.

"Considering the savings market is undergoing what can only be described as a slowdown, consumers may need to wait until at least the start of September before providers adjust to the 0.25% rate rise, if they do at all," concluded Rachel. "All in all, it's a bit of a feeling of déjà vu from the base rate rise in November 2017, and savers' patience may have already run out."

What next?

If you're still patiently waiting, you'll want to make sure your savings pot isn't languishing in an easy access account paying less than the base rate of 0.75%, and keep an eye on those fixed rate bond charts in case there's a rate there that's high enough for your needs – any top rates are not likely to stick around for long.

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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