Commenting on the Bank of England’s decision to increase interest rates to 4 per cent, Kevin Brown, savings specialist at Scottish Friendly, says:
Higher interest rates are no guarantee of better outcomes for savers
“A higher base rate from the Bank of England might feel like good news for savers if it translates into more attractive rates on saving accounts (1). However, any potential benefits are best thought of in the wider context of the imposing financial pressures many currently face (2).
“Inflation accelerated to 3.5 per cent in September and continues to erode the purchasing power of money held in cash (3). And for households already coming to terms with higher energy bills and other living costs, any gain from improved savings rates risks being overshadowed by the growing burden that is the cost of living.
“As such, this afternoon’s decision is a reminder of why it is important to look beyond headline interest rates when thinking about longer-term financial goals.
“Cash savings remain essential, particularly for unexpected expenses and money people may need in the near future. However, for those who can afford to put money aside for several years – and are comfortable with the risks involved – investing offers the potential for greater long-term returns.” (4)
Source (1) https://www.bankofengland.co.uk/explainers/what-are-interest-rates
Source (3) https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/latest
Source (4) https://www.fca.org.uk/investsmart/right-investment-you