Interest rates are rising what does this mean for my savings and investments?

The Bank of England has raised interest rates again for the 11th time since December 2021. The new base rate has increased by 0.25% to 4.25%, after the Office for National Statistics revealed inflation rose to 10.4% in February.
The rate of inflation currently far exceeds the target of 2% so interest rates are rising to bring down inflation. People will face higher borrowing costs, which amid the cost of living crisis will only make things harder for many people.

Will interest rates rise again in 2023?

The interest rate is at it’s highest level for 14 years, rising consistently The Bank of England will continue to review how the economy is doing every six weeks or so. If inflation continues to remain high, then rates may change again.
The next interest rate decision will be made on Thursday 11 May 2023.

Will the interest rate affect my savings?

Savers have had it tough for some time now so this week’s rise should mean a boost to savings rates.

Theoretically a rise in the Bank of England base rate should lead to higher interest rates for savers, however many high street banks have been slow to pass on the last 10 rises to savers. Even with the rise, the average savings rate still remains well below inflation so you would still find you are losing value in real terms.

Banks will often increase rates for both borrowers and savers, yet in many cases you will find the borrowing rates on mortgages and loans will increase more than savings. This is because banks look to cover their costs so will pay less to savers than they charge borrowers. On average, less than half of the base rate hikes have been passed on to savers in the last 12 months.

So if you have a nest egg saved, yet also have debts you may find that it is more beneficial to repay these over saving. But what if you don’t have debts and are looking to find the best savings rate?

Finding the best savings rate

That lump sum that you have saved for a rainy day could be working harder for you. At Eastern Financial Consultants we use Insignis Cash Solutions to actively manage and review our clients cash savings. Ongoing management and proactive communication will mean you achieve a consistently competitive return on your cash savings.

Available for individuals, companies, charities and trusts, you only need to sign up once to open multiple accounts now and in the future. With access to thousands of savings accounts and a variety of term options, all with FSCS protection of £85,000 per individual per bank.

Will the interest rate rise affect my investments?

Possibly yes. However, it is important to remember that investments are a long-term saving vehicle and that investors should remain calm and not react during any short term economic event.

The information in this article should not be regarded as financial advice. Please remember that the value of investments can go down as well as up and may be worth less than was paid in.