How will a halt in interest rates affect bank accounts?
Published 16 February 2012
The Bank of England says interest rates are unlikely to rise before 2014. How could the predicted halt in interest rates affect bank accounts?
The Bank of England's latest quarterly forecasts for inflation and growth have indicated that interest rates are unlikely to rise from their historic low of 0.5% before 2014, as the UK economy continues to face the fallout from the financial crisis, The Telegraph reports.
The Bank's Governor, Sir Mervyn King, said that a rise in interest rates now would plunge Britain back into a recession, and hurt savers even more.
He commented: "We all want to return to a world with a more normal level of interest rates. But if we were to raise interest rates to such a level now, that would serve only to turn a gradual recovery into a recession, put more people out of work, and cut the value of assets on which many savers depend."
The prediction that interest rates will be put on hold is likely to come as disappointing news for many savers, who are struggling to get good returns on their money.
It also means many bank account customers will continue to receive very low interest rates. Having said that, bank accounts nearly always offer much lower rates than actual savings accounts - and it may be that account holders will look for other benefits, rather than just interest rates, when choosing accounts in the future.
There are other types of bank account out there that could provide alternative benefits. Basic bank accounts - or perhaps an alternative to a basic bank account, the thinkmoney Current Account - don't pay interest, but could give you some extra help budgeting for your monthly outgoings.