The Bank of England has voted to hold the base rate at 5.5%, but economists remain convinced it is merely a case of delaying the inevitable.
With indications that both the housing and retail sectors are at the start of a downturn, some bearish economists are predicting the rate will fall as low as 4.5% in 2008, though 5% is a more commonly touted figure.
What that means is today’s decision is merely a temporary respite for savers, who should consider locking into one of the top fixed saving rates before they tumble along with the base rate.
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So what rates are available to you?
The best available on the market at present is Bradford & Bingley’s fixed rate bond, offering a rate of 6.8% with a minimum investment of £1,000, followed closely by the Anglo Irish Bank fixed rate bond, at 6.75% with a £500 minimum investment.
For savers who want for more flexibility in the amount they can save, both Northern Rock (6.71%) and Nationwide (6.7%) have competitive rates, but come with a minimum investment of just £1.
All of the above are only one year deals. If you had your mind set on something longer term the Icesave three year fixed rate bond is comfortably the best product out there, offering a 6.5% rate. It does come with a £1,000 minimum investment, though.
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What else will the base rate cut mean?
No doubt many cash-strapped households will have been praying for a cut in the base rate to ease their mortgage repayment woes.
And while they may not have got it now, it seems only a matter of time before they do (as we mentioned at the start). That means homeowners looking to remortgage may be far better served by opting for a discount or tracker mortgage, which follow the base rate, than the more popular fixed rate products.
At present the top two year tracker deal can be found at the Co-Operative, offering a rate of 5.49% with a £999 fee. As for discount mortgages, Cheshire Building Society has a two year deal at 5.44%, but it comes with a hefty £1,999 fee. As an alternative, the Principality offers a two year discount mortgage at 5.49% with a more manageable £1,149 fee.
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Savers scored, shoppers scorned
In summary, the decision to hold the rates is good news for those looking to stash money away, but bad news for those in the market to spend.
However this situation is likely to only prove temporary, with some economists predicting the first cut to come as soon as February. So if you are looking to save, you should act sooner rather than later if you’re looking to get the best rates.
Compare fixed rate saving deals here
