How will savings interest rates rise with the BoE base rate?

jdw2000

With a base rate of 0.25%:
Savers can get 1%-1.5% for large amounts (NS&I and Santander 123, for example. For smaller amounts savers can get up to 5%.


Let's say the base rate rises (as it surely will) to 1%/2%/3%/4%/5%:
What rate of savings will be available?


Are savings rates typically always a percent or two above the base rate?

Thrugelmir

If base rate remains low. Will savings rates follow downwards? That's the question I'd be currently asking.

Savings rates in normal times would be below base rate. With lending rates above.

jdw2000

Thrugelmir wrote: »

If base rate remains low. Will savings rates follow downwards? That's the question I'd be currently asking.

Savings rates in normal times would be below base rate. With lending rates above.

I think savings rates will indeed stay low, or go lower, if the BoE base rate remains low. But the BoE base rate will surely rise. It's just a matter of when.


Does anyone remember what interest rates the likes of NS&I were providing when the BoE rate was around 5%?

Rolandtheroadie

Average interest rates

http://swanlowpark.co.uk/savingsinterestannual.jsp

BoE rates
http://www.bankofengland.co.uk/boeapps/iadb/Repo.asp

jdw2000

Rolandtheroadie wrote: »

Average interest rates

http://swanlowpark.co.uk/savingsinterestannual.jsp

BoE rates
http://www.bankofengland.co.uk/boeapps/iadb/Repo.asp

Thank you very much for that. That is very useful indeed!


So savings rates pretty much mirror the BoE base rate, unless my tired eyes are deceiving me. That's kind of what I expected to see.

Thrugelmir

jdw2000 wrote: »

Thank you very much for that. That is very useful indeed!


So savings rates pretty much mirror the BoE base rate, unless my tired eyes are deceiving me. That's kind of what I expected to see.

Unless Central Banks continue their current policies of injecting liquidity into the system. As bank balance sheets still have some way to go in deleveraging. Unusual unpredictable times.

chucknorris

jdw2000 wrote: »

With a base rate of 0.25%:
Savers can get 1%-1.5% for large amounts (NS&I and Santander 123, for example. For smaller amounts savers can get up to 5%.


Let's say the base rate rises (as it surely will) to 1%/2%/3%/4%/5%:
What rate of savings will be available?


Are savings rates typically always a percent or two above the base rate?

You also need to be thinking about inflation, higher savings rates with higher inflation won't be any better for savers. In fact, Carney has indicated that the BOE may tolerate 'some' inflation without raising the base rate, if it is felt that the economy would struggle with a higher base rate, so the situation for savers could worsen.

AG47

jdw2000 wrote: »

With a base rate of 0.25%:
Savers can get 1%-1.5% for large amounts (NS&I and Santander 123, for example. For smaller amounts savers can get up to 5%.


Let's say the base rate rises (as it surely will) to 1%/2%/3%/4%/5%:
What rate of savings will be available?


Are savings rates typically always a percent or two above the base rate?

I remember being able to get 7 or 8% on some savings accounts just before interest rates fell to 300year lows.

That's a better yield than even the best BTL, without all the stress of tax changes and bad tenants and falling property prices.

coastline

You can see in the chart the link between inflation and the base rate was broken after the financial crisis.
Even when inflation moved higher around 2008 the base rate remained flat and that's probably what will happen soon.

http://econ.economicshelp.org/2009/04/link-between-inflation-and-interest.html

Savings rates have also held up with base rates in recent years..

http://www.economicshelp.org/blog/1765/interest-rates/real-interest-rates/

jdw2000

chucknorris wrote: »

You also need to be thinking about inflation, higher savings rates with higher inflation won't be any better for savers. In fact, Carney has indicated that the BOE may tolerate 'some' inflation without raising the base rate, if it is felt that the economy would struggle with a higher base rate, so the situation for savers could worsen.

The situation has indeed been grim for those who want to save. But when the base rate goes up, which it will eventually, the question is: will savings rates at banks going up with it?

I would tend to think/hope that they will... that savings rates follow the BoE rate to some extent. But I'm only going by my gut feeling and don't have any knowledge on this.

wymondham

what... rates are variable??