As widely anticipated, the Bank of England has raised rates from 0.25% to 0.50%.
This is the second recent rate rise from an all-time low of 0.10%. Rates rose from 0.10% to 0.25% in December. This is the first back-to-back increase since 2004.
The decision to was 5-4 between the 9 members of the Monetary Policy Committee with 4 members voting for a larger increase of 0.50%.
As a sense of perspective, pre-Covid base rate was 0.75%.
Expectations of interest rates going forward
Policy makers also signalled today that there would be further rate rises this year and the money markets are now discounting the base rate climbing to as high as 1.5% in the next 12 months.
We expect the base rate to increase to 1% this year and to normalise at 1.75%-2% over the next 2-3 years
The next MPC meeting is the 17th March.
Are bank savings rates expected to increase?
The overall direction of travel is that available savings rates are increasing.
Bank by bank, each bank will decide for themselves on whether and when to pass on each rate rise. Some banks have passed on the December rate rise in full, others have passed it on in part and there are also a small number who have not passed on any of the rate rise.
It is worth noting that Savings and Deposit Rates have already seen significant increases over the past 6 months, particularly from challenger banks. For example, our best one year has increased to 1.35% and our best 5-year rate is now 1.85%.
How can Insignis help?
The current account rates available from certain banks are still as low as 0.01%. Using Insignis will ensure your clients are maximising returns on their cash holdings whilst simultaneously reducing risk as their funds are diversified across several institutions, maximising FSCS protection eligibility.
Insignis works with a panel of 40+ banks and building societies, providing access to market-leading rates in addition to the comfort often associated with the high-street banks your clients are familiar with. We constantly monitor the rate environment remain proactive in communicating new rates to clients.