The UK’s media went into a frenzy at the release of the news that Bank of England governor, Mark Carney, is dropping the base rate of interest to a record low of 0.25%.
I watched the speech in great anticipation, and, after sifting through the jargon I got together with icount Money to produce an easy to understand infographic that simplifies the whole thing.
Here is what it’s going to mean to us, the normal everyday folks of the UK.
Who and what will be affected by the base rate drop?
The top dog at the Bank of England, Mark Carney, has already said the banks will have no choice but to pass on the savings directly to their customers who have tracker mortgages.
Currently one-in-five households have a tracker mortgage, that’s 1.5m people in total – so good news for many!
For fixed rate mortgage holders, however, it’s not so good news. 46% of households currently have a fixed rate mortgage.
Lenders are able to use their own discretion when it comes to savings, and unsurprisingly, they’re expected to totally ignore them.
If you have a fixed rate savings account, you should be OK and shouldn’t see any change to your rate at all.
The average interest rate on an Easy Saver account is a rather pathetic 0.65% at the moment and it’s expected to drop by a further 0.4% – hardly encourages you to save does it?
Variable rate savings accounts will see their rates change so keep a close eye on yours.
My advice would be to have a shop around, if you see something better, move your money.
You want the best rate for you, not the bank.
About three-quarters of current accounts have no interest rates at all – if yours does, expect it to drop.
I can tell you from personal experience the interest on the Santander 123 account is dropping, and, with the increased cost of the account, it’s making the account become more and more unappealing – I’ll be shopping around.
Your bank should contact you to let you know of any changes in your rates.
The state pension will not change a bit, regardless of scaremongering from some parts of the political sphere.
Share prices have been driven up by the Bank of England’s decision and private pension holders will see an increase in value.
They are detached from base rate and therefore will never be affected.
Your credit limit and interest rate are determined by risk factors, the better your credit rating, the lower the risk and the better your interest rate is – simple.
Loans, unlike credit cards, are linked to base rate of interest. Therefore, you could see your rate of interest fall.
If it hasn’t fallen, call your provider and ask why and see what you can haggle out of them.
It’s highly unlikely interest rates will change at all.
OK, it’s not going to offset the ridiculous cost of tuition fees, however, there is every chance you’ll see a drop in the interest you pay on your student loan from September.
I won’t be expecting students to be dancing in the streets though.
There are always winners and losers when the base rate of interest changes.
Savers have been getting the shitty end of the stick – when it comes to interest rates – for years, so not much surprise for us there.
Investing your money, rather than just saving it, is fast becoming a more attractive option.
If you have been left perplexed at your new rate, on any of your accounts, shop around and switch.
It’s something we all don’t do enough. And, with Open Banking not too far away, it’ll be easier to do so.
Have you been affected – good or bad – by the base rate of interest drop?
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