Are interest rates on savings finally set to rise following change in the base rate?

In November, the Bank of England took the decision to raise its base rate for the first time in a decade, from 0.25 per cent to 0.5 per cent.

While the increase may only be small, savers across the country may now be hopeful that rates on savings accounts will rise, following years of historically low rates and minuscule returns.

However, early indications are that the banks and building societies have not been so keen to instantly increase rates for savers following the rate rise.

Mark Carney, the Bank of England Governor, said he expects all providers to increase returns for savers.

“Banks did pass on the cuts to their depositors, and we expect competition to push it in the other direction,” he said.

However, Rachell Springall of publication, Moneyfacts, has said that a rise may not begin until the start of the new year or later.

“The link between the bank base rate and savings has been severed for years, most recently thanks to Government lending initiatives, which has meant banks don’t need savers’ cash to fund their mortgage books as they used to,” she said.

This means that the rates offered by banks are predominantly driven by market competition, rather than being linked directly to the base rate.

For savers that may mean that smaller competitor banks may be the first to break ranks and increase rates to steal business from high street saving providers.

Experts, therefore, recommend that savers shop around to find the most suitable savings account to suit their individual needs in the new year.