Following the Bank of England’s decision to cut interest rates to a record low of 0.25% at the beginning of August and the initial reaction to that from within the financial sector, the resultant effects continue to be felt over a month later.
Cash savings accounts have been hit the hardest, with some banks making cuts to their interest rates five times larger than that made to the base rate. Most savings products now offer interest rates that pay only half of what savers would have received from them in 2011, with the past five years offering lower and lower rates and the latest cuts serving to worsen the outlook.
Nationwide Building Society made cuts to just over one hundred of its accounts, which include children’s accounts, ISAs and easy-access savings accounts. The Co-Operative Bank meanwhile slashed the rates on twenty-seven of its accounts, including eleven personal accounts.
In addition to many savings products having their rates slashed, with over fifty seeing reductions larger than that of the Bank of England’s 0.25% cut, a further twenty best buy deals have been withdrawn from the market entirely. Many are also predicting that savers should prepare for further cuts in the near future.
However, there is a much more positive outlook following the base rate cut for those with mortgages. Many should see their payments go down from this month, although some mortgage products have a floor or collar on their rate which will prevent them from going any lower.
It’s potentially a good time to shop around to save money by switching products too, with most banks and building societies currently attempting to attract customers with increasingly competitive mortgage deals. Whilst some lenders will charge penalties for early repayment or fees for switching, the long-term savings could outweigh the initial added expenditure.
The Brexit result had the expected negative impact on the housing market during July. However, the range of attractive mortgage products currently available following the interest rate reduction should go some way to counteract that, as both first-time buyers and those already on the property ladder can potentially benefit.