Low interest rates, stockpiling purchases, closed schools, slumping stock prices. Almost all areas of life are being affected by the spread of the COVID-19 virus. However, in troubled times fixing your interest rates now might be a life-line for your savings later on.
We may only be a few weeks into the current crisis, but it’s already been a roller coaster ride for UK savers. The first budget from the new Chancellor of the Exchequer, while a great boost for the wider economy, could be categorised as being largely ineffective for UK savers.
The real headline came during the Bank of England’s earlier announcement of a rate cut to 0.25% (which later dropped again) and the package of measures to support the economy in the wake of Covid-19. The UK banking sector is deemed to be more robust than it was back in 2007, however, as far as savers are concerned, the new Term Funding Scheme and Countercyclical Capital Buffer will free up over £290 billion in funding for banks to lend to businesses. This is money that banks might no longer need to attract from retail savers and this is significant as it represents around 11% of the £1.7 trillion UK savings market.
With today’s news that the Bank of England interest rate was reduced from 0.25% to 0.1%, we may start seeing savings rates being reduced across the board. Although some easy access offers remain strong, the recent rate reduction may not have been applied yet, but it could only be a matter of time before this changes.
Fixed rates and guaranteed interest
FSCS protected fixed rate bonds are one of the safest ways to save money in uncertain times. Savers know how much they’ll earn and how long it will take them to earn that interest, meaning that they don’t have to worry about fluctuating stock prices or pandemics.
Supplement your interest rate with a bonus
When shopping around for a better rate for your savings accounts, don’t forget that cash bonuses can supplement your equivalent interest rate. For instance, at Raisin UK we offer a £100 welcome bonus for depositing £75,000 into any savings account with a term of six months or more (terms and conditions apply), which could increase your earnings from your savings.
Think about your savings
Although there’s plenty to think about, we shouldn’t worry that it isn’t worth saving our money. Shopping around for better rates and locking your money into fixed rate bonds could be the life-line your savings need. Also, remember that for savings under £85,000 you are protected by the FSCS, so even if the better rates are from banks you don’t recognise, your money is protected.
This article may contain information about partner banks, savings accounts, rates and bonus offers which were correct at the time of publication on 19th March 2020.