Savers urged to shop around as base rate cut means ‘lower return on their cash’

Savers are being urged to shop around to find the best deals after interest rates have been cut by a quarter of a percentage point to 5% on Thursday.

The Bank of England reduced interest rates from 5.25% to 5% which will reduce saving rates and savers will receive “a lower return.”

Ele Clark, senior money editor at Which? said, “Firms may respond to today’s decision by lowering their rates, which means savers get a lower return on their cash.

“When it comes to savings, loyalty is seldom rewarded. Which? research has consistently found that challenger banks and building societies offer better rates than high street banks, so if you’re unhappy with the returns you’re getting, now’s the time to consider switching.”

Rachel Springall, a finance expert at Moneyfactscompare.co.uk, said: “It’s wise to look beyond the more familiar big banks.”

Mark Hicks, head of active savings, Hargreaves Lansdown said a rate cut “is never going to be music to the ears of savers, but this shouldn’t do too much damage.”

He added, “The market was split on whether we were going to get a cut, so decisive action from the Bank of England is going to mean some banks bring rates down slightly, especially among easy access accounts, but we’re not expecting massive movements.

“However, what really matters for fixed rates, both now and in the coming months, is what happens around expectations of rate cuts in the future.

“If the Bank of England decides to cut rates twice and then pause, we should see minimal disruption to the savings market. More consistent rate cutting of four or more would drive greater savings rate change.

“Longer-term savings rates give the clearest indication of where the market expects things to settle, and with three-year and five-year fixed savings rates at 4-4.5%, the market is currently not predicting any significant falls below these levels.

“At the moment, the highest easy access rate and one-year fixed rate accounts still pay over 5%, so savers can still beat inflation by an impressive margin.”

Michael McGowan, Managing Director of Foreign Exchange, at Bibby Financial Services said, “After months of no change, today’s interest rate decision is a declaration of economic confidence from the Bank of England that will echo through international markets.

“Following the European Central Bank and the Bank of Canada, the Bank of England’s rate cut seeks to stimulate growth, not least among smaller businesses buoyed by the prospect of more affordable lending.

“Nonetheless, the path ahead remains uncertain. Against a backdrop of stubborn services inflation, and with energy price rises expected later in the year, future rate decisions remain unpredictable. For businesses trading internationally, currency volatility remains a thorn in the side and they will need to fortify their FX strategies to navigate the choppy waters ahead.”