Skipton Financial Services
Monday, April 10, 2017 - 15:51

What do low interest rates mean for your finances?

With the UK economy facing a period of economic uncertainty following the historic EU Referendum, some of the measures taken by the Bank of England to sustain growth present further challenges for careful savers.

In August 2016, the Bank reduced its base rate to a new historic low of 0.25%. This has resulted in many banks and building societies reducing rates on their savings accounts, with some easy access rates going to as little as 0.01%. On a £10,000 savings pot, that works out at just £1 of interest a year before tax.

A long-term trend

Low interest rates are not a new thing of course, with the Bank of England having kept interest rates at 0.5% between March 2009 and August 2016.

Back in October 2007, base rate was as high as 5.75%. According to Building Societies Association figures, the average one-year fixed rate bond on offer at that time was 6.15%. On a £50,000 pot of money, that’s a gross return of £3,075 a year.

In February 2017, with base rate at 0.25%, the average one-year fixed rate bond on offer was just 0.67%. So on a £50,000 pot, that was a gross return of just £430 a year.

What are your options?

This backdrop has made it more of a challenge to generate strong returns on your savings. All indications are that lower interest rates are here to stay for many years yet, meaning you might need to reassess your options.

It’s always a very good idea to check if your financial arrangements cater for all of your needs – both short and long-term. Savings accounts should always play a key part in your plans, but for goals five or more years away, there may be more options available.

For your short-term financial needs…

Savings accounts remain the best place for money needed at short notice or in case of an emergency, and they’re still the ideal home if you’re not in a position to put your capital at risk. What’s important is to make sure you’re getting a rewarding rate of interest for your money, rather than leaving it in a low-paying account.

At Skipton we provide a well-designed range of savings accounts from Easy Access to Fixed Term, and tax-free ISAs. To find out more about our range of products and current rates, call 0345 607 9740 or visit your local Skipton branch. We’ll be happy to sit down with you and discuss your options, to help you make suitable decisions for your money.

For your long-term financial needs…

As you may not be able to rely upon savings accounts to meet your long-term goals, other routes could be more appropriate – such as investing your money in the stock market.

Although investing involves the risk of losing some, or all, of your money, you have greater potential to achieve the returns you need – which could make a huge difference to you and your family’s future.

Your Skipton financial adviser can assist you in reviewing your current savings and investments, in order to offer tailored investment recommendations. You will never be placed under any pressure to act on this advice – you can take as long as you need.

Please remember that stock market-based investments are not like building society savings accounts as your capital is at risk and you may get back less than you invested. The value of your investments and any income from them may fall as well as rise.

Call us now on 0800 731 5342Request a Call Back

If you would like to receive information similar to this via email - please subscribe to our mailing list - click here.

Similar insights & resources

Why get financial advice?

When it comes to your money, seeking financial advice from an expert can have an equally positive impact on this hugely important area of your life. 

Coping with financial difficulties

It doesn’t matter how well off you are, almost all of us worry about money from time-to-time – and that anxiety can be exacerbated when it comes to coping with financial difficulties.

Financial scams – beware!

We feel it’s vital that you’re fully clued up on this subject, in case you’re ever targeted by a fraudster. So we’ve provided useful information on what to look out for, what to do if you’re ever approached and various types of scams.