Are banks going to increase interest rates on Term Deposits. 11 February at 7:34AM in Savings & investments 21 replies 1.7K views

Johnjdc

adindas said:

Johnjdc said:

adindas said:

skray said:

Hi
From experience could anybody estimate how long the banks usually take to raise the interest rates (if at all) on Cash ISA and other fixed term deposits following the Bank of England interest rate rise. The BoE has recently raised the interest from 3.5 to 4% but I cannot see the interest rates for savings and term deposit accounts going up except for Virgin Money now offering 4% up from 3.8% on 1 year Cash ISA, apart from some instant access accounts as well.
I have a 2 year Cash ISA maturing sometime mid-2023 at 0.9%. I intend to close it prematurely and reinvest (I will make a net profit even after paying a penalty) but want to make sure I am availing the best interest available.
That is should I try applying for 3.8% - 4% currently available or wait longer.

There is a direct correlation between the BoE and Bank/lenders interest rate

https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate

Yes, it is currently sitting @4.00% including Thursday 2 February 2023, 0.5 percentage points to 4%

As it is still quite new some banks might not response to this rate interest hike yet. So it is very high chance some will response with 4%+.

Fixed rates have very little to do with the bank rate at any given moment let alone a direct correlation.

Fixed rates have been falling since the autumn although the bank has been consistently raising spot rates.

You're better off looking at gilts to see what might happen although that's not a direct correlation either - SONIA rates are even better but I can only find the spot rates not a graph.

One year accounts might go up a bit based on what's happened over the last few weeks with gilts but the two year is fairly flat.

https://www.marketwatch.com/investing/Bond/TMBMKGB-01Y?countryCode=BX

Are we talking about any given moment here  or until within the window up to mid year ??

"I have a 2 year Cash ISA maturing sometime mid-2023 at 0.9%. I intend to close it prematurely and reinvest (I will make a net profit even after paying a penalty)"

And you are advising people to invest in gilt while the op clearly indicate about about Cash ISA?

I'm not advising people to invest in gilts - that may or may not be a good idea - I'm saying that looking at the current/change in the gilt yield over the term you plan to invest for is far more likely to give you an idea of what interests rates are going to do than believing in some mystical connection between the Bank of England Bank Rate and long-term fixed rate savings.