Streetwise Magazine, Norden & Bamford, March 2014 | Page 15

Check your CASH ISA rates now!
The chronic low interest rate environment continues into the New
Year.
Savings rates have a crucial impact on everyone's finances and the
economy. But when will they rise?
The interest on savings is closely aligned with the Bank of England's
base rate. This rate hit an all-time low of 0.5 per cent in March 2009
and has been stuck there ever since.
Interest rates will stay at a rock-bottom 0.5 per cent until 2016, after
the new Bank of England governor Mark Carney said they would not
be raised until UK unemployment falls below 7%.

What next for the base rate?
Experts believed the rate would stay static at a meagre 0.5 per
cent for at least several years - and Carney has confirmed that
this is the case.
The volatile money markets indicate you may have to wait until 2016 for a
0.75 per cent rate and 2017 for 1 per cent.
The base rate was a hefty five per cent in July 2008, but plunged
dramatically to 0.5 per cent by March 2009 after the Monetary Policy
Committee carried out a series of savage cuts in an attempt to help the
faltering economy.

It's not just about base rate the factors that affect savings rates...
Savings rates are affected primarily by the base rate. But there are other
influences afoot. It comes down to two main factors - the amount of
competition in the market and the need for banks to raise money.
Banks traditionally operate by raising money from savers and lending it to
borrowers. But if they spot an opportunity to lend, they can also borrow
from each other via money markets.
The Bank of England's money-printing efforts have helped banks and
borrowers but pushed down savings rates
The rates on these markets are affected by a whole range of factors. The
base rate is the biggest influence.
But one of the largest drivers during the crisis has been actions
undertaken by the authorities to reduce lending rates, such as the Bank of
England's colossal quantitative easing programme - £375billion of printed
money swashed into the system.
This has pushed down money market rates even when the bank rate has
been unmoved for more than three years.
More recently, the Bank's £80billion Funding for Lending Scheme,
announced in spring 2012, had an equally dramatic effect.
The problem is that pushing down these rates means banks lap up the
cheap cash and are less likely to borrow money from you, the saver.
So the rates they offer are cut.
Rates have fallen drastically in the last six