Cash Chats ep 66: The interest rate rise and your savings

This week I talk about the recent interest rate and how it will affect you, mainly in terms of the return you can get on your savings.

The Bank Of England increased the base rate of interest from 0.5% to 0.75% earlier this month, making it the highest rate we’ve seen since the financial crash. You’d expect this to be passed on to savers, but I think that’s unlikely, especially when you consider what happened when rates rose last November.

I explain why, and share where I think are the best places to keep your savings. Plus, changes to Lloyds and Halifax current account rewards, and why I’d stay clear of the Asda Christmas Savings card.

This week’s links

My notes for the show

These notes are what I use to prepare for recording the podcast. They really are notes, not an article. So some of the sentences will be choppy, perhaps even incomplete, and not all the details will be written here. Still if you don’t want to listen to the podcast you can get the gist of the episode by reading below.

So how will the rise affect you?

Well if you’ve a tracker mortgage it’ll go up.  This is me. So if you’ve got £100,000k that’s about £12 a month. Some mortgage providers will have put that increase in already, the rest will likely add it in your September repayment. Not all variable rates will change. Fixed mortgages won’t change.

It could make other types of borrowing more expensive too. So loans, credit cards and so on.

You’d hope though it’ll boost your interest on savings. Well, I don’t think it’ll make much difference. This is the second increase in the last 12 months, and we didn’t see much difference after the increase from 0.25% to 0.5% in November. Only have of banks boosted rates, and those that did the average increase was 0.2%.

And even if they do, average rates are generally very poor. It’s likely you’re getting below 1%. You might not even be getting 0.1%. So don’t assume you will be getting more. Shop around.

The best rates for the last four or five years have been in current accounts. But it’s unlikely they’ll improve.

In fact, things have got worse in some of the top accounts.

Halifax You currently get £3 a month. From October this falls to £2 a month. It used to be £5 but cut when interest rates fell to 0.25% But it didn’t go up again when rates were boosted to 0.5%, and now we’re at 0.75%.

Lloyds Club and Bank of Scotland Vantage used to offer 4%, then dropped it to 2%. But last month this fell to 1.5%. This is on balances up to £5,000. So the max you can earn is £74.50.

So are these accounts worth it anymore?

I’ve switched away from my Lloyds account, moving to Barclays last month where I’ll get £11 a month for a year.

Well you can still get six cinema tickets or a magazine subscription with Lloyds

I’ve still got my Halifax, and £24 a year is better than nothing, but if I hadn’t already taken advantage of the many other deals I wouldn’t be staying.

Both accounts require two direct debits. Lloyds needs £1,000 a month paid in, Halifax £750

But there are better options in my opinion

Nationwide 5% on £2,500 for first year, plus a 5% regular saver

Tesco 3% on £3,000

First Direct switching offer

M&S Bank £185 in vouchers

And Halifax does offer a £75 switching bonus, sometimes as high as £125.

While we’re talking about savings

Asda Christmas Savings card,

The idea here is you save up to £144 before the 18th November and you’ll get a top up. If you save £49 you get £1, so that’s 2%. If you save £97 you get £3, and if you save the full £144 you get £6. Roughly 4%.

The idea is you put aside a small amount every week and see it gradually build up ahead of Christmas.

And you can have as many cards as you like.

So why don’t I like it? Well, you have to spend the money in Asda, which is great if you shop there all the time.

But personally I think you’re better off opening up one of the current accounts I mentioned above. If you can only save a small amount each month, consider a regular saver. Though you don’t get the interest for a year, you can get 5% from various banks including First Direct, Nationwide and M&S. So that’s more money you’ll make. And you can keep earning interest after interest

Now, if you are shopping at Asda, then you can game the card. There’s no reason why you have to pay the money in every week. You can make a single lump sum on the last day – so 18th November.

The best bank switching, cashback, interest & overdraft offers (May 2021)


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