Whilst good news for borrowers, the recent Bank of England base rate reduction has triggered a round of interest rate cuts on savings products across the market. In a falling interest rate environment, we outline the practical steps savers can take to make the most of their cash.
Believe it or not, some banks have savings accounts that pay below the base rate. By keeping an eye on the best buy tables in the newspapers and online price comparison sites, you’ll see that there’s no need to accept such low rates.
At Paragon Bank, we aim to offer consistently competitive interest rates. Like all banks, we can’t ignore the wider interest rate environment and we can’t maintain stand-out rates indefinitely. If interest rates on loan products fall, we’ll need to pull back on our savings rates in order to keep the books in balance. However, while we may have to reduce our savings rates, we will try to keep them competitive.
If you are certain that you won’t need to access your money for a long time, then you may want to consider whether to set up a fixed term savings account. Typically, banks pay savers a higher interest rate in return for ‘locking-up’ their cash.
Even if you can’t commit to a fixed term savings account, there are still easy access accounts that continue to pay 1% or more in interest, including our own. Our easy access account allows as many withdrawals as you need. There are no penalties or restrictions. If you’re looking at what’s on offer elsewhere, make sure you understand any restrictions upfront.
When interest rates on cash savings fall, it can be tempting to consider alternatives that hold out the promise of higher returns, for example, peer-to-peer lending or investing in shares. Cash savings with UK banks are covered by the FSCS compensation scheme, protecting eligible savings deposits up to £75,000. Other investments may not be. Always check first by visiting the FSCS website