This month’s Inflation Report makes sobering reading for savers. The governor of the Bank of England has admitted that this year will see a slowing in economic growth and this is going to be accompanied by a level of inflation that is widely predicted to reach at least 5% before the year is halfway through.
In order to counter the high levels of inflation certain projections regarding interest rates have been made. The base rate of interest is at an unsustainable low rate of 0.5% currently, but until now announcements on when this might change have been as rare as speculation as been rampant.
There is now a clear plan for the escalation of interest rates. The rate will be gradually ramped up to 3%, if everything proceeds according to plan this should be by the end of 2013. The first increment will be by a quarter of a per cent within the next four months and the rate will be 1% by the end of the year. By the end of 2012 the rate is planned to be somewhere around the 2% mark.
All of this has a big impact on those looking to make long term financial decisions. There are some long term fixed rate investments available, especially in the offshore market, that can look appealing given the current interest rate. It is important to remember that interest rates in the UK could conceivably rise on a much sharper curve, and to greater heights than is currently being planned.
The kind of fixed rate products that are looking attractive at the moment are likely to become less appealing as time goes by. This is the main reason that these kind 0f products are locking money in for long periods. Easy access is probably the best thing for savers at the current time. Being able to get quick access to your cash and ‘helpful banking‘ may be best things to opt for until the market adjusts to the new interest rate climate.
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