MARTIN Lewis is urging savers to switch bank accounts after the Bank of England hiked interest rates.
The founder of MoneySavingExpert.com warned that banks will be less likely to pass the new interest rates on to savers.
Martin is urging savers to look for better rates and switch accounts
However, mortgage holders are likely to be hit hard by the new rates.
The Bank of England (BoE) hiked interest rates by 0.5% today.
Interest rates will rise from 1.75% to 2.25% and the move will make the cost of borrowing more expensive.
Economists had expected a hike of 0.75% as the BoE tries to tackle high inflation.
However, the Bank of England said that the government’s relief on energy bills meant costs would be less of a driver of inflation than before.
Martin Lewis took the news to Twitter and explained how the rise in interest rates will affect individuals in practice.
His post read: “Bank of England‘s just increased UK base rates by 0.5% points from 1.75% to 2.25%. Highest since 2008.
The MoneySavingExpert then said that: “SAVINGS many won’t pass rise on, be prepared to switch.
“With savings, the key is the top rate and top fixes will go up. So wait a day or two for new rate to be factored in, then check your savings, and if it is crap ditch and switch.”
This means savings rates are more likely to edge up slowly rather than change immediately.
Anyone currently getting a low rate on easy access savings could find it’s worth looking around for a better rate after any rate rise and moving their money.
No savings accounts beat inflation, which is currently sitting at 9.9%.
However, there are decent rates available and it’s vital that savers check any existing account they have, because not every savings account has improved, as some deals can pay as little as 0.01%.
For example, right now savers could bag 4% in interest with a two year fixed rate savings account.
Those looking for an easy access account, which allows unlimited cash withdrawals could get 2.1% back in interest on their savings.
Rates are likely to creep over the next few days so it’s worth keeping a close eye on them.
Martin Lewis also explained how the rise in interest rates affects mortgage holders.
Ditch the ISA for a better saver
With today’s personal savings allowance a saver would only be taxed on their savings if they had £65,000 or more in the bank – so it’s unwise to open a cash ISA right now.
Martin Lewis actually encourages most to sign up for a Lifetime Isa (Lisa) to get thousands of pounds in free cash if you’re a saver.
You could bag up to £32,000 for free from the government if you max out this savings account over the long-term.
A Lisa is savings account for anyone aged 18-49 – you can put in up to £4,000 a year until you’re 50, and the government adds an additional 25% bonus on top.
But you can only use the money you save to either buy your first home or at retirement, or you’ll forfeit the bonus.
How can I bag the best savings rates?
Use comparison sites. Rachel Springall, finance expert at Moneyfacts.co.uk previously told SE: “Comparison sites are a quick way to compare the top rates.
“Savers can even search by how much they are looking to put aside and how long they are prepared to lock it away.”
With your current rates in mind, don’t waste time looking at individual banking sites to compare rates – it’ll take you eternity.
Research websites like MoneyFacts.co.uk and price comparison websites such as Compare the Market, Go Compare and MoneySupermarket will help save you time and show you the best rates available.
These sites let you tailor your searches to an account type that suits you.