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Martin Lewis is warning anyone with savings that their rates will be dropping ‘in days’.
It means those who are squirrelling money away for a rainy day will face losing interest on their accounts and making less money on their savings going forwards unless they are locked into a fix.
The money expert reacted to the Bank of England’s decision to cut interest rates on his latest episode of The Martin Lewis Podcast on BBC Sounds, Spotify and Apple Music.
The decision by the BoE to cut the base rate from 5 percent to 4.75 percent, a 0.25 percentage points drop, will have a knock-on effect on those with savings.
Money Saving Expert founder Martin Lewis said that the drops in interest rates could begin anywhere from the next few days to the next month.
He warned: “If you’ve got savings accounts, easy access accounts, variable accounts, expect them to drop by around a quarter of a percentage point over the next few weeks.
“You’ll be given notice, maybe the best buys won’t drop by that much because it’s been very competitive over the last few weeks so they might get dropped by 0.15 percentage points.
“And if you’ve got fixed rate savings, well they’re fixed.
“But the rate at which you can fix mirrors what’s going on with mortgages. It’s all on long term predictions of interest rates.”
Martin said that tracker rates ‘move pretty quickly’ and that with savings, your bank or building society has to give you “reasonable notice, which tends to be between seven and 30 days if your savings are dropping.”
He added: “Reasonable notice, but it is a reasonable clause so doing it the next day is probably too swift but if you’ve got an online account and you’re notified with a week, it’s probably arguable that that’s reasonable.
“Depending on the product and exactly what type you’ve got, those rates that are variable if they’re dropping will be dropping somewhere between the next couple of days and the next month.”
The Bank of England makes a decision on whether to change its base rate every three months, as a way to control inflation.
If people are spending too much money, prices rise which causes inflation. By increasing rates, the BoE can push up the cost of borrowing, thereby pulling money out of the economy.
In the other direction, a base rate cut encourages spending at a time when economic activity is slowing or flat.