‘Don’t be scared to switch!’ Savers urged to shop around as interest rates remain high | Personal Finance | Finance

Savers have been encouraged to search the market to see if they can get a better interest rate.

Bank of England bosses decided this week to keep the base rate at 5.25 percent as inflation continues to fall.

Kate Steere, deputy editor at personal finance comparison site finder.com,said now is a good time for savers to shop around.

She told Express.co.uk: “Savers shouldn’t be scared to switch. Many are missing out on higher rates because they’re unsure about moving their money.

“My advice to savers would be to find the best rate available for the savings product you’re interested in and check that the provider is FSCS (Financial Services Compensation Scheme) protected.”

She said those who are anxious about switching can set up an accout with a small amount to start with.

She explained: “If you’re worried – and the account allows you – maybe transfer just £1 first before moving the full amount across.”

Kevin Mountford, co-founder of Raisin UK, also urged savers to make the most of the high rates.

He said: “If you see a high rate, lock if in now. While it may be tempting to tie your money up in a high rate easy access account, these always run the risk of decreasing over time – and may well do so quickly.

“Fixed rate bonds, particularly two years and above will help protect your interest from any drops in rates to come.”

Turning to mortgage trends, Ms Steere said rates are starting to fall although “not as fast as many borrowers would like”.

She commented: “Lenders will be trying to predict what the base rate will do over the next few years.

“Everything is pointing in the right direction and the sentiment is that we’re nearing the end of this rate cycle.

“Rates will most probably settle, but we shouldn’t expect them to drop to the low levels seen in previous years. This higher base rate is here to stay for a while.”

Mr Mountford also noted rates on many mortgage products are falling but rates are still “well above” 5.5 percent.

He warned homeowners to brace for the high rates to continue, saying: “If we do see rates stick at 5.5 percent or 5.25 percent then borrowing will still remain quite high and may do so for well over a year as the Bank of England try to hit their two percent inflation target – not great news for mortgage holders.

“For rates to be lowered, the Bank of England will need signs that inflation is falling significantly and getting closer to its two percent target.”

He said the central bank bosses will be looking in particular at the core inflation figure, as this is a better sign of the direction of long-term inflation.

Core inflation fell from 6.9 percent for the year to July to 6.2 percent in August, while overall inflation fell from 6.8 percent to 6.7 percent.

Mr Mountford said: “If the UK enters a recession next year, a prolonged period of negative economic growth, the bank may lower rates sooner, as recessions frequently result in job losses and reduced spending.

“If rates remained high during this time, it could potentially lead to a deeper recession. Alternatively, if inflation does not decrease as quickly as anticipated, rates may remain high for longer or even need to be raised further.”

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