BoE raises rates to 5.25%

tom188

this is gonna sound like a really dumb question, but if the boe rate is 5.25% shouldnt the interest rate all savings account minimum be 5.25%?
just clocked on to the fact that before it was 5% yet some nationwide accounts you only get a couple of %

No
The Base rate just gives a starting point and is as much an indicator as anything else. It is normally reflected approximately by the rate that banks can borrow off each other LIBOR.
Banks/BS’s use savings to invest or lend. If they can only lend to each other at approx base rate why would they pay the saver more than this and make a loss?This is why mortgages are normally 1-2% points above, savings 1-2% points below.

Generally but not exclusively...
Account that are expensive to run tend to have lower interest rates.
Profit/Management costs needs to be built in reducing overall savings rates.
High rate accounts that are potential loss leaders need to be subsidised by lower rates...etc

Mr_Mumble

RPI up to 4.4%, a rise of 0.5%. CPI = 3.0%, RPIX=3.8%

So savers are, in real terms, losing another 0.25% despite the base rate rise and a basic rate taxpayer needs to be getting 5.55% just to match inflation!

RPI is now at its highest level since December 1991, the same month the USSR broke up, nine months before black/white Wednesday and when the bank rate was at 10.375%!

[Deleted User]

Mr_Mumble wrote:

RPI up to 4.4%, a rise of 0.5%. CPI = 3.0%, RPIX=3.8%

So savers are, in real terms, losing another 0.25% despite the base rate rise and a basic rate taxpayer needs to be getting 5.55% just to match inflation!

Interestingly an Office of National Statistics 'Personal Inflation Calculator' was released yesterday.

See this thread

richgirl

This site is forecasting that interest rates will rise to 5.75% during 2007

UK Interest Rate forecast for 2007 - Bank of England to do battle with inflation

UK Interest Rates could rise to 5.75% in 2007

free4440273

richgirl wrote:

This site is forecasting that interest rates will rise to 5.75% during 2007

UK Interest Rate forecast for 2007 - Bank of England to do battle with inflation

UK Interest Rates could rise to 5.75% in 2007

and interestingly dated 26th december 2006 - this guy is clearly in the 'pessimist' camp much like myself
p.s. i am saver like many here and can't wait to have a 6 per cent return on my bond which expires in october 2007