Those looking to boost their savings are in for another year of measly interest rates whilst those looking for fixed-rates are best signing up to a short-term deal.
This comes after the news last week that Halifax had reduced the fixed rate it pays to those who have recently opened a savings account. At present, they only pay 1.2% for one- fixed year and it rises to just 1.4% if the saver moves to an account for a two-year fixed rate. The two-year fixed rate accounts for only £9 a month after tax from an income that amounts to £10,000.
A spokesperson for the Financial Advisory and Consultancy Firm Chase de Vere, Patrick Connolly, stated: ìSavers have a tough choice of leaving their money in cash with dismal rates, or taking more risk with some of it by moving into corporate bonds, shares and property. If you stick to cash and want a fixed-rate bond, go for the shorter-term deals.î
The low interest rates are the result of the fact that the Bank of England has voted to keep the base rate at 0.5%, where it has remained for 71 consecutive months. The decision to do so is the result of a fear that raising it may halt any economic recovery.
There is disagreement over when exactly the Bank of England will raise the base rate. Capital Economics, a research consultancy, has suggested there is a possibility of an increase in the base rate towards the end of 2015. However, they believe that if there is a rise, it will only be between 0.25% and 0.75%.
There are those that are more pessimistic about a base rate rise. Scott Corfe, who represents the Centre for Economics and Business Research, a think-tank, has said that is becoming more likely that the Bank of England will not raise the rate this year. He predicts an increase could come around February 2016.
An option for savers is to utilize their cash Isa allowance. The best deals include Virgin Money who offer 1.3%. Furthermore, there is a deal with Barclays for an Instant Isa account that is giving 1.28% on accounts that go up to £15,000. This figure increases to 1.38% for those accounts that reach up to £30,000. The rate goes up further to 1.48% if your balance amounts to more than £30,000.
To get the best return on your investments, you can compare savings accounts with Money Expert.