Whilst the Bank of England initially seemed to be holding steady at a rate of 0.5% in the wake of Brexit, the announcement at the start of August that not only was the rate to be cut further to 0.25%, but also that there may well be further cuts in future, wasn’t all that surprising to many in the financial sector. In the wake of the turmoil following the EU referendum, it seems a very long time since anyone was considering interest rates might rise, when in fact it wasn’t all that long ago at all.
The recent drop is just the latest episode in the continuing story of falling interest rates which has been told throughout 2016 and looks set to continue well into the future. Prior to the Brexit result, it had been expected that the base rate might see an increase in 2018. With a new all-time low now set by the Bank of England, it looks as though interest rates aren’t likely to get better for savers any time soon, with a rise back to the previous 0.5% rate not expected until at least 2020.
The knock-on effect of the low base rate is that banks and building societies are removing their most competitive accounts from the market. Moreover, many are also choosing not to replace these withdrawn accounts with alternatives, giving savers less choice within the market as a result.
The best option for savers at the moment is to spread their money in order to get the best of all the deals available. Reward accounts, which pay set bonuses to savers who pay in a certain amount each month, can offer an attractive alternative whilst interest rates offer less attractive percentage-based returns.
Whilst the outlook for those in the market for savings accounts may not be so bright at the moment, in contrast the impact of Brexit upon the financial world may, in fact, be positive. Fixed rate mortgages are likely to be set at lower rates as the base rate comes down, and the indication is that lenders are happy to continue lending at these lower rates for the foreseeable future.