Are savings rates on their way down?

ForumUser7

Patr100 said:

We are now in a recession. Rates tend to be lower in a recession.
Central banks/Govt want to encourage spending and not saving in a recession .
Inflation will probably peak by the end of  this year. Further reducing the pressure on BoE to increase rates.
Yes mortgage rates are still low  historically but in terms of proportion of overall income they are higher than the 90s etc
so eg 5% mortgage rate is equivalent to more than double compared to past years in terms of affordability.
There will be huge pressure to protect mortgagers from further increases in the recession.
So the BoE rate may still rise slightly but may also plateau - don't see an actual reduction quite yet but year + longer term savings banks appear to have this baked in..

It's a shame this era of high savings rates will be relatively short lived I'd been hoping the base rate would either increase, or stay about the same for the next several years but as you've said, we are now in a recession, so I can't see this happening much either Hopefully the banks and building societies don't take any base rate decreases as an opportunity to slash their savers interest again, but they probably will.

Ocelot

I have transferred out my low-paying FR ISAs (0.8-1.4%) to 3 year fixeds, paying 4.4-4.5% over the last few weeks. I still have some expiring early next year, which I will keep untl maturity, and 4 FR bonds expiring next year.

At least if rates plummet I've taken some advantage of the current rates.

Damn - the i and K keys seem to have gone on keyboard. A cat sat on it and probably broe it!

Topiary

Ocelot said:

I have transferred out my low-paying FR ISAs (0.8-1.4%) to 3 year fixeds, paying 4.4-4.5% over the last few weeks. I still have some expiring early next year, which I will keep untl maturity, and 4 FR bonds expiring next year.

At least if rates plummet I've taken some advantage of the current rates.

Damn - the i and K keys seem to have gone on keyboard. A cat sat on it and probably broe it!

3 years fix good option was consider 5 but that is a long  time money locked away . great rates 10 x what we were getting a year ago.

pearl123

I believe there might be another interest increase in December. Whether, banks will pass on any rate increase is another matter. 

Albermarle

ForumUser7 said:

Patr100 said:

We are now in a recession. Rates tend to be lower in a recession.
Central banks/Govt want to encourage spending and not saving in a recession .
Inflation will probably peak by the end of  this year. Further reducing the pressure on BoE to increase rates.
Yes mortgage rates are still low  historically but in terms of proportion of overall income they are higher than the 90s etc
so eg 5% mortgage rate is equivalent to more than double compared to past years in terms of affordability.
There will be huge pressure to protect mortgagers from further increases in the recession.
So the BoE rate may still rise slightly but may also plateau - don't see an actual reduction quite yet but year + longer term savings banks appear to have this baked in..

It's a shame this era of high savings rates will be relatively short lived I'd been hoping the base rate would either increase, or stay about the same for the next several years but as you've said, we are now in a recession, so I can't see this happening much either Hopefully the banks and building societies don't take any base rate decreases as an opportunity to slash their savers interest again, but they probably will.

The various forecasters still seem to think that Bof E base rate will increase from 3% to 4.5%. However it was originally forecast to go higher still. This reduction in upwards pressure, combined with an expectation they will probably start falling later next year, has taken the heat out of the longer term rate fixes.
Personally, due to the reasons mentioned by Patr100, I think they might only get to 4%. Things will look bleak for many people after Xmas ( credit card bills, cold weather etc) so not sure the Bof E will be wanting to keep raising rates at that time.

mlc2009

pearl123 said:

I believe there might be another interest increase in December. Whether, banks will pass on any rate increase is another matter. 

They are struggling to pass the current one on

Pretty sure they pre raised the mortgage rates in anticipation though

dunstonh

mlc2009 said:

pearl123 said:

I believe there might be another interest increase in December. Whether, banks will pass on any rate increase is another matter. 

They are struggling to pass the current one on

Pretty sure they pre raised the mortgage rates in anticipation though

Mortgage fixed rate deals are not priced on the base rate directly.     There are a lot of influences on those which can head in the same direction as the base rate but also in the opposite direction.

Mortgages linked to the base rate, such as tracker deals, will follow the base rate.

Patr100

It's easer to forget how far we've come proportionately in savings rates.
eg I had a 1 year  fixed saver that matured last May 22 - rate 0.85%
Now 6 months later you can still get around 4.35% .
Of course high inflation has eroded its value - but should be lower next year.

P933alilli

On the education page of the vanguard website the consensus prediction on inflation for next year is 6.5% and on monetary policy a prediction of a 3.5% interest rate by the end of this year and 4.5% interest rate by the end of next year. While savings accounts aren't correlated with the bank rate i'm hoping top fixes will stay around 4% for a few months. 

RG2015

Patr100 said:

It's easer to forget how far we've come proportionately in savings rates.
eg I had a 1 year  fixed saver that matured last May 22 - rate 0.85%
Now 6 months later you can still get around 4.35% .
Of course high inflation has eroded its value - but should be lower next year.

I have a ladder of 1 year fixed accounts maturing next year. These were just a bit off the top rates at the time but I preferred to stick with my existing banks.

26/05/2023		2.15%
27/06/2023		2.45%
25/07/2023		2.68%
17/08/2023		2.95%
20/09/2023		3.32%
20/09/2023		4.00%
02/11/2023		4.30%
11/11/2023		4.45%

I have another Ford Money 4.45% which has to be funded by 02/12/2022 but after that I doubt that there will be any higher rates available.

I may then revert to regular savers of which I already have a 3.50%, a 4.50% and a 5.25% along with the NatWest / RBS 5.00%.

I really hope that inflation will start falling as well very soon.