SAVERS WARNED IT'S 'IMPERATIVE' TO ACT NOW - HAVE YOU REVIEWED YOUR ACCOUNT RECENTLY?

While living costs remain high, the Bank of England has been boosting its base interest rate in a bid to curb spiralling inflation. The UK inflation rate hit 9.9 percent in August and while this is a modest drop from July's 10.1 percent rate, this figure is only expected to increase again when the guaranteed energy price cap rises again in October. Rising interest rates come as better news for savers, but experts are calling for Britons to compare and switch accounts for better returns.

Since December 2021, the Bank of England has increased its base interest rate six times, taking it from 0.1 percent to 2.25 percent.

These interest rate increases form part of the measures the BoE is taking to achieve its ambitious Government-set target of reducing inflation to two percent.

Higher interest rates make borrowing more expensive while further encouraging households to save.

The idea is that both of these things will reduce how much people spend overall, which should help to push inflation down.

However, how long it takes high street banks to pass on these interest rate increases to savers is another matter.

Rachel Springall, finance expert at Moneyfacts, said while "the variable rate savings market has experienced a positive period of rejuvenation since the start of the year, this is largely due to competition in the top rate tables".

She continued: "Whereas the back-to-back Bank of England rate rises have yet to be fully embraced by every savings provider, particularly some of the biggest high street banks.

"Savers hoping to be rewarded for their loyalty will be disappointed that not one of the biggest high street banks has so far passed on all six base rate rises to easy access accounts since December 2021, which equate to 1.65 percent."

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In fact, Ms Springall continued: "Some have passed on just 0.09 percent. There are still easy access accounts out there paying less than the base rate so it's imperative savers compare and switch, especially if they have not reviewed their accounts in the past couple of months."

Historic trends suggest no guarantee that savers will benefit from a rate rise, but it does suggest a movement in the top rate tables, which are dominated by challenger banks and building societies, according to Ms Springall.

She continued: "Considering the more unfamiliar brands is incredibly important, and there is little reason to overlook them if they have the same protections in place as a well-known brand.

"Amid a cost of living crisis, making regular monthly savings may not be a priority for some, but it's important consumers have enough money to fall back on to cover any emergencies."

A single mum from Bristol has told Express.co.uk how she saves £250 a month with one simple change to her spending habits.

How does she do it? Find out HERE.

But while interest rates increase, they still appear to be no match for the inflation rate, which does have an effect on the value of savers' money.

Alice Haine, personal finance analyst at Bestinvest said: "With the BoE expecting inflation to peak at just under 11 percent in October and remain above 10 percent over the next few months, the real return on any cash sitting in a savings account will be deeply negative - no matter how great the headline rate is.

"Actually being able to save at all will be the biggest challenge for many in this cost of living squeeze as they contend with higher food, energy and mortgage costs, but those lucky enough to have money to set aside each month must shop around for the best rate to make their money work as hard as it possibly can."

With the best easy-access accounts climbing to 2.10 percent this week and the best fixed-term accounts hitting 4.10 percent according to Moneyfacts data, every penny in additional interest will be crucial in the fight against high inflation, which eats away at spending power.

However, Ms Haines suggests people with longer-term savings goals, such as with more than five years and "ideally at least 10, should consider investing their money in the markets".

She added: "While higher returns from the markets can never be guaranteed, a long-term approach allows a diversified investment portfolio to absorb the highs as well as the lows and deliver better growth and potentially inflation-beating returns over the long term."

2022-09-25T14:45:52Z dg43tfdfdgfd