Martin Lewis gives advice on rising interest rates
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The UK is currently in the midst of a cost of living crisis which is being partially caused by soaring inflation. To address this situation, the Bank of England has raised the base rate which has been passed onto savers through the high street banks. One of the financial institution’s to do this is Santander which has raised interest rates to a “competitive” level for its customers.
The bank has launched a range of “market-leading” ISAs, including Santander’s eISA which pays 1.85 percent.
On top of this, the bank is offering its Cash ISA product which pays 3.10 percent for 18 months.
The Cash ISA account pays a three percent interest rate for one year and 3.25 percent for two years.
Furthermore, Santander is offering a £50 retail voucher for new and existing customers which transfer their bank balances.
However, Santander’s eISA is not the only savings account which has experienced a sizable rate hike.
Following the bank’s decision, interest rates on the following savings accounts were raised to the following amounts:
- One Year Fixed Rate ISA – Three percent AER/ tax-free (fixed)
- 18 Month Fixed Rate ISA – 3.10 percent AER/ tax-free (fixed)
- Two Year Fixed Rate ISA – 3.25 percent AER/ tax-free (fixed).
Hetal Parmar, the head of Banking and Savings at Santander UK, shared why the financial institution has opted to support its customers in this way.
Ms Parmar said: “Saving for the future is important to many and our increased Cash ISA rates will give customers a boosted return – all tax-free.
“The voucher offer is an added extra, putting more money in our customers’ pockets this autumn.
“Our ISA transfer team is in place to help customers benefit from these limited time offers.”
Sarah Coles, a senior personal finance analyst, Hargreaves Lansdown, outlined the predicament many savers are going through.
Ms Coles explained: “We’re wedded to savings accounts from the high street giants, partly because we have no idea quite how miserably low the rates are, but also because we don’t really care.
“At a time of runaway inflation and rising rates, both are expensive mistakes.”
Until inflation comes down to level high street banks can compete with, the finance expert shared what savers should do in the interim period.
She added: “The kinds of rates people are expecting to earn on easy access aren’t unreasonable.
“Rapidly rising rates mean that right now, it’s possible to earn more than two percent on easy access savings. It’s just that the high street giants aren’t delivering, so if you want these kinds of rates, you really do need to move to a smaller or newer alternative.
“Once you have an emergency savings safety net of three to six months’ worth of expenses in an easy access account, you can make the rest of your savings work even harder.
“If you’re prepared to tie your money up for a fixed period, you could make an even better return, because right now you can make more than 3.5 percent by fixing for a year.”
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