As a saver, you’ll know that rates can decrease as well as increase. But what does a decrease in rate mean for savers? In this blog, we’ll explain what impact lower interest rates could have on you, and how you can plan ahead to make the most of your savings.

In the last two years, we’ve seen inflation rise to a 41 year high of 11%¹. This has meant that prices for everything from food to travel have been growing at a much higher pace than before. To tackle this, the Bank of England raised the base interest rate through consecutive rises to 5.25%. While this has meant the cost of borrowing through mortgages and other loans increased, it also raised interest rates on savings products. Savers have been able to take advantage of these higher rates to make their money work harder for them. The higher the interest rate, the more the savings deposited in an account will grow.

Timing will be crucial if you’re hoping to maximise your savings in the longer term. Securing a favourable rate by opening a new fixed rate ISA* or bond could make a significant difference to how much your savings will grow. The higher the interest rate, the more you’ll earn in interest on your savings, over time. Put simply, if you’re putting money away for a holiday, a new car or a special occasion like a wedding, securing a fixed rate savings account now could help you to reach your savings goal more quickly than if you were to open an account after rates have fallen. 

A fixed rate savings account, such as a fixed rate Cash ISA or bond, can allow you to maximise an interest rate for a set period of time. This will mean your savings are shielded against a future fall in interest rates, until the fixed rate term comes to an end. However, keep in mind that if rates were to rise, you wouldn’t benefit from a future increase during the agreed term.

 

If you already have a fixed rate savings account that is coming to the end of its current term, or a variable rate savings product, or if you have funds you don’t need to access for a year or more, then locking into a fixed rate will protect those savings against falling interest rates. At Coventry Building Society, we offer a range of fixed rate savings products, from fixed bonds to fixed rate Cash ISAs.