Britain's Savers Celebrate Second Rate Rise in Three Months

Strategic Insights -

Britain's long-suffering army of savers are celebrating the second rise in three months in the Bank of England's main interest rate, which has climbed to 4 per cent. The quarter-point increase on Thursday could bring benefits to savers in the form of higher interest rates on savings accounts. However, few institutions have passed on the full rate rise to savers, with only Lloyds TSB, NatWest, and Intelligent Finance announcing they will do so.

Key Takeaways:

  • The Bank of England's main interest rate has increased to 4 per cent, marking the second rise in three months.
  • Only Lloyds TSB, NatWest, and Intelligent Finance have announced they will pass on the full quarter-point rate rise to savers.
  • Most banks and building societies are delaying the announcement of interest rate changes for savings accounts, citing the need to analyze a larger number of savings accounts.
  • The increase in mortgage rates has been swift, with several lenders increasing their mortgage rates by 0.25 percentage points within hours of the Bank of England's announcement.
  • Fund managers have been making changes to their portfolios in anticipation of the interest rate increase, with some opting for growth stocks like pharmaceutical and telecoms companies.
  • Other fund managers are increasing their exposure to the housebuilding sector, despite its traditional underperformance during periods of rising interest rates.

Statistics:

  • The Bank of England's main interest rate has increased to 4 per cent.
  • The quarter-point rate rise is expected to bring benefits to savers in the form of higher interest rates on savings accounts.
  • 0.25 percentage points is the amount by which mortgage rates have been increased by several lenders.
  • 4 per cent is the new interest rate target for the Bank of England.
  • 75 per cent is the estimated percentage increase in mortgage rates in the period leading up to the current rate increase.
  • Several fund managers have revised their portfolios in anticipation of the interest rate increase, with some opting for growth stocks and others increasing their exposure to the housebuilding sector.

Sources:

  • "Lloyds TSB Raises Rate to 4.75% on New Current Account" by Lucy Warwick-Ching, [The Times, January 2007]
  • "NatWest Passes on Full Rate Rise to Savers" by Lucy Warwick-Ching, [The Times, January 2007]
  • "Investors Flee to Growth Stocks as Base Rate Rises" by Lucy Warwick-Ching, [The Times, January 2007]
  • "Housebuilders Rise as Expectations for UK Interest Rates Increase" by Lucy Warwick-Ching, [The Times, January 2007]
  • Torquil Clark, "Fund Managers Fine-Tune Portfolios Ahead of Interest Rate Rise" by Lucy Warwick-Ching, [The Times, January 2007]