JSMedia – The latest news that’s been making headlines in the financial press is the news that the Bank of England is scaling back its controversial lending scheme, known as Funding for Lending. Last summer, the government made PS80bn available to building societies and banks to lend money without requiring deposits from savers. The move has pushed savings rates to historic lows. Cash ISA rates paid 1.68% last year, down from 2.18% just a year ago. But, the Bank of England’s decision will delight savers, who’ve seen their money ruined by the high cost of borrowing and poor returns.
The Bank of England is also a major customer of building societies and is keen to encourage them to increase their interest rates. Its latest decision means that the average saver is now likely to receive just a third of the interest they were earning in the past. For instance, if they had invested PS10,000 in a savings account and earned 0.37 per cent in interest each year, they’d have received PS37 a year.
The news of the Bank’s move will be welcomed by savers. While NS&I, the Government’s retail arm, still doesn’t intend to increase its base rate, the minnows are showing the way. In December, Suffolk and Swansea building societies increased their rates in line with the base rate. By doing so, they matched the rate cut by 0.15 per cent, thereby giving all their savers a boost.
Savers Cheer As Bank Stops Help For Mortgage Lenders
While the increase in the base rate won’t have any immediate effect on individual savings customers, the rise is sure to have a significant impact on their savings accounts. This means that the new rates for mortgage loans are likely to rise further. However, the Bank of England has said that it would prioritize helping small businesses, which is a far more sensible option. If it doesn’t, it’ll be a disaster for the economy.
The move has triggered a flurry of activity in the market for savings accounts. With the increase in the base rate, banks and building societies are unable to offer their customers lower interest rates. The increase in the base rate, for instance, will affect the standard variable rate and other base-rate-linked products. These will have higher interest rates if the lender wants to attract more customers. This is the right decision for savers.
While the new rules may sound like a disaster, the fact remains that the Bank has not yet taken any action. The current account switching process is very complex, taking weeks, and will be dependent on the banks’ policies. Furthermore, it can’t be helped if the new policy does not help the consumer in the long run. This is why mortgage lenders have to keep a tight rein on their services.
This is the good news for consumers. The new policy will stop the pressure on borrowers, as the money market’s Libor rate will remain at a healthy level. This will also ease the pressure on mortgage borrowers, as it will continue to be a stable market for mortgages. So, savers have a lot to cheer as the Bank stops helping mortgage lenders! The change is a good sign for the economy.
Despite the cut in the base rate, interest rates remain low. The best savings accounts pay more than one percent, while the worst paying accounts pay less. This is good news for savers, but for consumers, this is bad news for the economy. The low savings rate will continue to affect the UK’s GDP, which is a key indicator of the economy. The new measures will help mortgage lenders stay profitable, and the bank will end the shortage of cash in the market.
The Bank’s decision to stop help for mortgage lenders is a good thing for consumers. Many of the worst savings rates are the best for home owners. The Bank has already lowered the base rate to a more favorable level. This is not a good thing for consumers, and it hurts their income more than a high interest rate. In addition, the new policies may have the opposite effect.