Savings Account Rates Rise Ahead of Base Rate Increase

A series of banks and building societies have increased their standard savings rates ahead of an anticipated increase in the base rate next month.

Coventry Building Society has replaced its Post Office Online Saver account with a new Limited Access Saver account paying 1.35 per cent AER. When it launched in June, the Post Office Online Saver account paid 1.33 per cent.

Bank of Cyprus has also increased its Online Easy Access Account savings rate to 1.34 per cent AER.

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Meanwhile, UK-based Shariah-compliant bank Gatehouse has increased the rates on three of its most popular savings accounts. The bank is now offering 2.14 per cent on its two-year fixed-term deposit account, and 2.33 per cent and 2.68 per cent on its three-year and five-year accounts, respectively.

These increases come just one month before the Bank of England’s Monetary Policy Committee (MPC) is due to meet to discuss changes to the base rate. In May, just three members of the MPC voted to raise the base rate from 0.5 per cent to 0.75 per cent, while the majority of members (including Bank of England Governor Mark Carney) elected to maintain the existing rate due to the poor underlying economic conditions.

However, in a recent speech, Carney pointed towards positive economic indicators as evidence that the UK may be bouncing back from the weak growth in the first few months of the year.

“The incoming data have given me greater confidence that the softness of UK activity in the first quarter was largely due to the weather, not the economic climate,” Carney said.

“A number of indicators of household spending and sentiment have bounced back strongly from what increasingly appears to have been erratic weakness in Q1.”

An August rate rise will be good news for savers, as banks tend to pass on the higher interest rates to their customers. However, some banks and building societies have pre-empted the rate rise by offering early rate rises to some savers.

As well as the latest increases from Coventry, Gatehouse and Bank of Cyprus, it was revealed last month that the number of cash ISAs and savings products on the market has hit a six-year high[1], suggesting that banks and building societies are preparing for a rise in traditional savings products.

The MPC will next meet at the Bank of England on Thursday 2 August.


Kathryn Gaw

Kathryn Gaw is a financial journalist based in Belfast, Northern Ireland. She has been writing about personal finance and investment trends for more than a decade, and her work has been featured in the Financial Times, City A.M., the Press Association, and The Irish Independent, among many other publications.